Startups law

Law 28/2022, of December 21, on the promotion of the emerging companies ecosystem —commonly known as the Startup Law— establishes a specific regulatory framework to boost the creation and growth of innovative startups. This law introduces measures that facilitate their integration into the current fiscal, commercial, and labor environment.

To be eligible for the benefits of this act, a company must meet the following criteria:

  • Be newly created or have been registered with the Commercial Registry for less than 5 to 7 years.
  • Not have been formed from a merger, demerger, or transformation of non-emerging companies.
  • Not have distributed dividends.
  • Not be listed on a regulated market.
  • Have a registered office or a permanent establishment in Spain.
  • Have at least 60% of its workforce on an employment contract in Spain.
  • Develop an innovative project with a scalable business model.
  • Not exceed an annual turnover of 10 million euros.
  • Be up to date with tax and Social Security obligations.
  • Not have been convicted of economic or corporate offences.

 

The National Innovation Company (ENISA) is the body responsible for certifying companies that apply to be recognised as startups. This certification, regulated by Law 28/2022 and Order PCM/825/2023, provides access to the benefits available to emerging companies. To grant it, ENISA assesses whether the company meets the following criteria:

1. Degree of Innovation

This assesses whether the company develops new or significantly improved products, services, or processes. The following are taken into account:

  • Undertaking of R&D&I (Research, Development, and Innovation) activities.
  • The existence of industrial or intellectual property registrations.
  • Obtaining public or private funding for innovation.
2. Market Attractiveness

This assesses whether the company operates in a market with growth potential and has generated interest or traction. Aspects considered include:

  • Supply and demand within the sector.
  • Strategies for customer or user acquisition and retention.
  • The evolution of the user base or sales.
3. Development Stage

This assesses whether the company has reached a sufficient level of maturity in its product or service. The following are taken into account:

  • The existence of functional prototypes.
  • The launch of a minimum viable product (MVP).
  • Initial market validation.
4. Business Model

This assesses whether the business model is scalable, i.e., it has the capacity for sustainable growth. The analysis covers:

  • The potential for growth in the number of users, operations, or revenue.
  • The possibility of replicating the model in other markets or sectors.
5. Competition and Differentiation

This assesses whether the company clearly differentiates itself from others in its sector. The following are considered:

  • The unique characteristics of its value proposition.
  • The barriers to entry it has developed.
  • Its positioning in relation to the competition.
6. Entrepreneurial Team

This assesses the experience, training, and complementary skills of the founding and management team. The analysis covers:

  • The professional background of its members.
  • Their previous experience in entrepreneurship or related sectors.
  • The team's ability to execute the project.
7. Third-Party Relationships

This assesses the company's dependence on or links with suppliers, key clients, or other economic operators. The following are taken into account:

  • The diversification of revenue streams.
  • The stability of commercial relationships.
8. Clients and Users

This assesses the volume and profile of the client or user base. The following are considered:

  • The number of active clients.
  • The level of loyalty.
  • The sustained growth of the user base.

Once the certification application and required documentation have been registered, ENISA has a maximum of 3 months to issue a decision.

Check the certification process at ENISA

Tax Incentives

Corporation Tax

  • Startups can be taxed at a rate of 15% for the first four years, provided they maintain their status as an emerging company.
  • They can defer the tax payment for the first two financial years without the need for guarantees or late payment interest.
  • They are exempt from making tax instalment payments during the first two financial years with a positive taxable base.

Personal Income Tax (IRPF)

  • Stock options: The tax exemption for shares granted to employees is increased from €12,000 to €50,000 annually. Payment of tax on gains exceeding this limit can also be deferred until the shares are sold, the company goes public, or ten years have passed. A specific criterion is also established to calculate the value of the granted shares or participations, which simplifies their tax valuation.
  • Deduction for investment in new or recently created companies: The deduction is increased from 30% to 50%, with a maximum base of €100,000. The investment period is extended from 3 to 5 years, and up to 7 years for startups in strategic sectors. Founders are also eligible to benefit.
  • Carried Interest: Returns obtained from fund management are considered income from employment and are integrated into the taxable base at 50%, provided that certain requirements are met.
Bonuses for Self-Employed Individuals
  • A 100% bonus on the minimum contribution base for three years for self-employed workers who lead a startup and also work as an employee for another company.
Tax Regime for Inpatriates
  • Reduction of the prior period without tax residence in Spain from 10 to 5 years to be eligible for the special tax regime.
Other Benefits
  • Regulatory sandboxes: The possibility to operate in testing environments with temporary licences.
  • Digital nomad visa: Specific regulation for foreign nationals who work remotely from Spain.
  • Reduction of guarantees: The possibility to request a proportional reduction of the guarantees required to access grants or advance payments.

Who can be digital nomads?

Third-country nationals residing in Spain while working remotely for foreign companies, categorised as:

  • Employees: can only work for companies outside of Spain.
  • Professionals / Self-employed: can work up to 20% for Spanish companies.

Requirements

In addition to meeting the general requirements for residing or staying in Spain, individuals applying for a remote work visa or authorisation must prove the following:

  • Company activity: the foreign company for which they work must have been in real and continuous operation for at least one year.
  • Remote work: the position must be fully compatible with remote work through the use of digital means.
  • In the case of an employment relationship: an employment relationship with the foreign company must be proven for at least the previous three months, and this relationship must expressly permit remote work.
  • In the case of professional or freelance activity: a commercial relationship with one or more foreign companies must be demonstrated for at least three months, and the conditions for remote work must be clearly defined.

Validity

  • Visa: up to 1 year.
  • Residence authorisation: up to 3 years, renewable every 2 years.