New Startup Law: Law 28/2022, of 21 December, to promote the startup ecosystem

Spain has adopted important changes to corporate and personal tax that encourage foreign investment and the movement of qualified professional talent.

I. Main novelties

The Startup Law amends relevant provisions in Spain’s main tax laws: the Personal Income Tax Law, the Non-Resident Income Tax Law, the Wealth Tax Law and the Corporate Income Tax Law, among which we highlight the following:

• Giving a definition of Startup that provides access to different tax and corporate benefits. In general, innovative companies up to 5 years old with a turnover of up to 5 million euros and which do not distribute dividends can be considered as such.
• Establish tax reductions for “Stock Options”, on which tax will be payable only upon their sale and not every year that they remain under ownership of its holder. In addition, the first 50,000 euros are exempt from taxation. This will encourage more companies to remunerate their employees with equity capital with the aim of retaining talent in the company, at least until it reaches the end of its early or growth stage.
• Establish a tax regime for expats that is more competitive in comparison to other EU states, which will attract foreign talent and the return of Spanish expats and their families. This will be achieved through the possibility that these people be taxed at 24% on personal income tax during the first year of application and the following 5 years, and that their taxable base will only comprise their wealth in Spain, as opposed to the normal regime, in which the taxable person’s global wealth is taxed.
• Increasing tax benefits for individuals who invest in Startups. Specifically, the previously established minimum exemptions for investment in Startups are increased from 60,000 euros to 100,000 euros and the deductions are increased from 30% to 50%.
• Establish a foreigner regime applicable to digital nomads, who will be able to work remotely from Spain for foreign companies for a period of 3 years.
• Allow non-EU students who come to carry out their university studies in Spain to remain with work residence in Spain for the following 2 years after finishing their studies.
• Improve the tax treatment of carried interest, which allows managers of venture capital funds to be remunerated for obtaining certain profit scales for the investors of the investment fund. Specifically, the improvement establishes that when they meet certain requirements, they may be considered as earned income, with 50% of the amount being included in the tax base.

 

II. Special tax regime (“RET”) applicable to workers posted in Spanish territory (Beckham Law)

With the amendment of Article 93 of Law 35/2006, of 28 November, on Personal Income Tax, important changes have been introduced for those who benefit from the special tax regime, including the following:

1. Decrease from 10 to 5 years in the number of tax periods prior to moving to Spanish territory during which the taxpayer may not have been a tax resident in Spain.

2. The scope of taxation as non-residents is extended to:

2.1. Teleworkers: posted by their employer to work “exclusively by computer, telematic and telecommunication means and systems”.

2.2. Company directors, regardless of their percentage shareholding in the company’s share capital. Only the limitation of the percentage of shareholding (less than 25%) is maintained for the director of a capital company.

2.3. Entrepreneurial activities in accordance with Law 14/2013.

2.4. Highly qualified professionals providing services to start-up companies (as defined in Law 28/2022), or carrying out training, research, development and innovation activities, in both cases receiving remuneration of more than 40% from employment, professional or business income.

3. Exception to the limitation of not obtaining income through a permanent establishment for the last two sections of the previous point: a teleworker cannot apply the Beckham Law as an independent or self-employed professional.

4. Extension of the special regime for family members: spouse or parent of children and children under 25 years of age.

5. Application of the exemption of income in kind established in the Personal Income Tax Law: until now, the RET did not allow any type of exemption or deduction in the annual income tax return.

Important note on income:

As we all know, before this new reform, all earned income was understood to be obtained in Spain and therefore taxed at the flat rate of 24%, even if the income was not materially obtained in Spain.

The same did not apply to other income: for example, if a capital gain was obtained outside Spain, it was not taxed in Spain. This example illustrates the main advantage for those who opt for the RET.

However, under the new law, all income from economic activities classified as an entrepreneurial activity will also be taxed, including income obtained outside Spain, thus adding a new type of worldwide income that must be taxed in Spain.

This category also includes income from the management of funds linked to entrepreneurship, innovation and the development of economic activity.

 

III. Teleworkers moving to Spain (nomad visa)

1. Creation of a new type of visa (one year) and residence authorization (three years) for teleworkers.

2. Cases envisaged: (i) employed person; (ii) professional activity; (iii) qualified professionals who can prove that they are graduates or postgraduates from universities of recognized prestige, professional training and business schools of recognized prestige or with at least three years’ professional experience.

3. Possibility to apply for the permit for those who are regularly in the territory: students or holders of a previous teleworking visa.

4. Extension of the residence permit for family members of the teleworker.

 

IV. Other aspects of special interest in the field of International Mobility

1. Extension of the residence period for jobseekers to 24 months (previously only one year) and extension of residence for trainees to 2 years.

2. Extension of the duration of residence authorizations under Law 14/2013 (Entrepreneurship Law) to 3 years: Golden Visa, highly qualified professionals, entrepreneurs, intra-corporate transfers, researchers, among others.

3. Modification of the procedure and definition of entrepreneurial activity, to simplify residence permits for entrepreneurs.

4. Registration with social security only with the passport during the first 6 months of stay or residence (within the framework of Law 14/2013).

5. Creation of a specific website for identity numbers and cards under Law 14/2013.

6. Requirement of criminal records only from the countries where the foreigner has resided in the last 2 years (instead of 5) plus an affidavit for those where he/she has resided in the last 5 years.

7. Elimination of the requirement for a foreigner identification number (NIE) for investors in Spain, along with the creation of a simplified procedure to apply for a NIF.

 

V. When to apply for the new residence permits?

Although the Law is in force as of today, we should be aware that the Government will issue instructions with the requirements for visas and residence permits, with a deadline of 31 March 2023.

We hope to have the instructions before such date although, taking into consideration that the Law does not make the application of the new permits conditional on the publication of the new instructions, there is no legal impediment to the application as of today.

However, there are operational and adaptation limitations. For example, if we access the application form published on the website of the Large Companies and Strategic Collectives Unit, we do not find the option to tick the option “international teleworkers”, so it is not possible to apply except with an additional explanatory document.