The Law to Promote the Ecosystem of Emerging Companies, popularly known as the Startup Law, positions Spain at the European vanguard in supporting innovative technology-based companies, as well as in the talent attraction and international capital.

Approval and Entry into Force

This rule was approved by a large majority in the Congress of Deputies on December 1, 2022, after incorporating numerous contributions from sector actors and different parliamentary groups. It was published in the State official newsletter on December 22, 2022 and came into effect the following day. The initiative is part of the Digital Spain Agenda 2026 and is framed in the structural reforms of the Recovery, Transformation and Resilience Plan, complementing the Create and Grow Law and the Concursal law.

Objectives of the Startup Law

The main objective of the Startup Law is to support the innovative startups digital-based, especially in its initial stages, adapting the administrative, fiscal, civil and commercial framework to its specific needs. Measurements include:

  • Promotion of the creation and growth of emerging companies.
  • Talent attraction and international investors to Spain.
  • Stimulation of public and private investment.
  • Promotion of the circulation of knowledge.
  • Promotion of rural entrepreneurship and elimination of gender gaps to increase the presence of women entrepreneurs.

Definition of Startup or Emerging Company

The law establishes the following requirements for a company to be considered startup:

  1. Do not exceed 5 years old (7 in strategic sectors such as biotechnology or proprietary technology designed in Spain).
  2. Not have arisen from a merger, spin-off or transformation of non-emerging companies.
  3. Do not distribute dividends.
  4. Not listed on the stock market.
  5. Have the registered office or permanent establishment in Spain.
  6. Have at least 60 % of the workforce with an employment contract in Spain.
  7. Not exceed an annual business volume of ten million euros.
  8. Develop a innovative entrepreneurship project with a scalable business model, whether through new or substantially improved products, services or processes.

Certification of Entrepreneurial and Innovative Character

To benefit from the benefits of the law, entrepreneurs must apply to ENISA (National Innovation Company) certification of compliance with the requirements. ENISA, a public company attached to the Ministry of Industry and Tourism, carries out the evaluation within a maximum period of three months, considering:

  • Grade of innovation.
  • Attraction of market.
  • Life phase of the company.
  • Business model.
  • Competence.
  • Equipment.
  • Dependence on suppliers, suppliers and rental contracts.
  • Volume of customers or users.

Certification Process and Results

In less than a year since the regulation of the procedure, the Ministry of Industry and Tourism has certified, through ENISA, a thousand startups. In addition to being fast, the certification process as emerging company It is simple and free for those who want to undertake. ENISA It has a search engine on its website that allows you to consult data about these companies, such as the date of certification or the autonomous community.

Tax Incentives for Startups

The main fiscal measures included in the law are:

  • Tax rate reduction in it Corporate tax and the Non-Resident Income Tax: from 25 % to 15 % in the first four years since the tax base is positive.
  • Extension of the special tax regime for displaced workers: it extends to professionals, entrepreneurs and investors displaced to Spain, who can choose to pay taxes on the Non-Resident Income Tax (IRNR) during the tax period of change of residence and the following five. It is required not to have resided in Spain during the 5 previous tax periods, compared to the 10 required before the law.
  • Postponement of payment of tax debt corresponding to the first two tax periods in which the tax base of the Corporate tax or the Non-Resident Income Tax be positive.
  • Extension of the maximum deduction base for investments in new or recently created companies, from 60,000 to 100,000 euros annually, and an increase in the deduction rate from 30 % to 50 %.
  • Improvement of the tax treatment of stock options used to pay the workers of the startup: the amount exempt from tax rises from 12,000 euros to 50,000 euros per year for shares or participations delivered by startups.

Administrative Advantages of the Startup Law

  • Company creation in one step: obtaining a tax identification number to complete the incorporation procedures later. The double registration and notarial procedure is eliminated, and a completely electronic procedure is foreseen.
  • Minimum tariff cost notarial and registry for the registration of limited liability companies.
  • Exemption from the requirement of equity balance during the first three years from incorporation, which implies that, in general, they will not have to dissolve if they suffer losses that reduce the net assets to less than half of the share capital.