With the approval of Spain’s new startups law, foreign entrepreneurs and digital nomads looking to live and work in the country can look forward to a slew of tax breaks and other benefits, but there are some rules to keep in mind.
Spain’s much-anticipated Ley de Startup was approved in the Spanish Parliament on Thursday, November 3rd, 2022, after a long and drawn-out legislative road with hundreds of amendments.
Simply put, the law aims to attract international investors, digital nomads, and new businesses to Spain by offering visa incentives, tax breaks, fewer bureaucratic hurdles, and other perks.
Originally announced in 2019, the law has undergone hundreds of amendments during its journey through the Committee on Economic Affairs and Digital Transformation, the Spanish Cabinet, and now the Spanish Parliament.
The Senate must ratify it before it can enter into force. Given the bill’s early support from most political parties, this appears to be a foregone conclusion in the coming weeks before the law takes effect in early 2023.
So, what should foreign entrepreneurs, remote workers, and digital nomads considering relocating to Spain know about this “groundbreaking” legislation?
The following are 15 key takeaways from the new law:
- What Spain considers a startup: To be eligible for the new law’s benefits, companies must be newly formed or emerging, that is, less than five years old, or seven years old in the case of biotechnology, energy, and industrial companies.
- There are no mergers: The company could not have been formed through mergers or spin-offs from other companies.
- Innovation is required: Startups must be considered innovative. The company must be attempting to solve a problem or improve an already existing situation. ENISA will be established to accredit both this status and that of a ’emerging’ company.
- Startup tax breaks: One of the main benefits of the law is that it reduces Corporation tax from 25% to 15% for a maximum of four years.
- Tax deferral for startups and digital nomads: Startups can also request that Corporation Tax – and, in the case of digital nomads, non-resident Income Tax (IRNR) – be deferred for twelve and six months, respectively, without accruing interest.
- Tax breaks for startups: The startups law raises the maximum deduction base for investing in startups (from €60,000 to €100,000 per year) as well as the rate of deduction.
- Based in Spain: The startup must be based in Spain permanently. Similarly, in Spain, 60 percent of a company’s workforce must have employment contracts.
- Startups will be disqualified from the law’s benefits if they are acquired by a non-emerging company, if their annual turnover exceeds €10 million, if they cause “significant damage” to the environment, or if any of their partners with a 5% stake in the company is convicted of a criminal offence.
- No dividend distribution: In a regulated market, startups must not distribute dividends or net return per cooperative member, nor must they pay contributions.
- Less bureaucracy: The new law also aims to eliminate some of the bureaucratic hoops that foreign investors must jump through by eliminating the requirement for international investors to request an NIE (foreigner ID number) in order to conduct this type of business. Investors and their representatives will now only need to obtain tax identification numbers in Spain.
- It is retroactive: The law will apply retroactively, which means that those who established a new business before the legislation went into effect will be able to reap the benefits, provided they meet the requirements.
- In Spain, a digital nomad is defined as: A digital nomad is defined by the law as “people whose jobs allow them to work remotely and change residence on a regular basis.”
- Tax breaks for digital nomads: Digital nomads who earn money in Spain but do not stay for more than 183 days are eligible to pay non-resident income tax (IRNR) rather than regular income tax. In general, IRNR in Spain is 24 percent, but it will be reduced to 15 percent for digital nomads.
- The’startup law’ creates a visa for international teleworking that allows non-EU citizens to enter and stay in Spain for a maximum of one year. When it expires, they can renew it by requesting a residence permit as a remote worker for another two years, and then renew it for another five years.
- Foreign students’ post-graduation stay period to find work or start a business will be increased from one year to two.
Kundan Goyal has 6+ years of experience in news editing and market research. He has helped businesses of all sizes make strategic decisions and predict future trends. Kundan only publishes content that will help them grow their sales and revenue. He publishes business news in many different categories to help industry’s learn more about any product.In his spare time, he enjoys cooking and listening music .
