Legal changes in Spain to compete in international talent attraction (New Start-up Act).
Spain will improve its current legal framework even more for digital nomads and international entrepreneurs thanks to the new Start-ups Act, currently under discussion but likely to be approved by the end of next month. The new Act will improve taxation and remove legal stoppers for foreign-national professionals.
Spain is competing to get a better position in the international market for attracting talent for its technological ecosystem as well as for medium-high wealth individuals.
Last November 3rd the Congress of Deputies, the Spanish Parliament’s lower house, published the Start-ups Act and now is awaiting final approval from the upper house, and is expected to come into force at the start of 2023.
The legislation aims to regulate efforts to attract talent and investments in companies with a high technological component and to cut the bureaucratic requirements for incorporating new entities.
The main changes consist ofon improving taxation for investors, and individuals inbound to Spain simplified visa procedures for working in the country and faster processing for obtaining Spanish ID numbers.
Thanks to this new regulatory framework, Spain and its main cities with a relevant start-up ecosystems such as Madrid, Barcelona, Mallorca, and Málaga amongst others, move forward for attracting new investment projects with high added value.
The main measures (subject to final approval) can be summarized as follows:
- Tax advantages for start-ups: Corporate tax rate is reduced from 25% to 15%, for a maximum of 4 years and starting from the first year that the entity is in a making profit position.
Payable Tax quotes could be deferred for two years without interest.
- A new tax framework for inbound to Spain. Expatriates will be allowed to opt to apply for the special regime that allows being taxed at a flat rate of 24% for their Spanish income, but nothing for the rest of their worldwide income. This special regime will be applicable for a ten-year period in some cases (currently five years).
The requirement of not being regarded as a tax resident in Spain in the previous 10 years to the expatriation has been cut to 5 years.
- Better taxation for stock-options plans: stock options will be taxed once they are executed, that is
,when they are sold. Up to 50,000 euros will be tax-free.
- Tax credits for investors in start-ups with a high technological component: Individuals investing in start-ups will be subject to a more favourable tax system for profits obtained from companies they have shares in and for the profits made from managing this fund.
- Carried interest will be taxed as labour income (progressive scale up to 54% depending on the autonomous community where the taxpayer is based) but with an exemption of
a50%.
- A new visa for digital nomads: non-resident foreign nationals in Spain who wish to live here and work remotely for an enterprise outside Spanish territory will be able to apply for a new international teleworking visa. This visa will be for a one-year period but subject to renovation for two additional years. With the possibility to get another extension if the conditions to opt for this visa are satisfied and with a real possibility to get a permanent residency after five-year period.
On the other hand, the tax regime applicable allows to be taxed in Spain at a flat rate of 15% on the first 600.000 euros of income.
- Spanish ID number for foreigners requirement will soften: the Act extends the deadline for obtaining NIEs from 3 months to 6 months. This rule will make easier to accomplish with the labour and tax regulations.
- Easier requirements for obtaining work permits as students: International students enrolled on courses at higher education centres intending to stay to work, start a business or conduct research in Spain will obtain a work permit guaranteed for 2 years after they complete their studies.
- Greater flexibility in the incorporation of Spanish Newco.
Notary and registry fees will be eliminated if the company is incorporated electronically
It will be possible to register the company in the Mercantile Registry in just 6 hours in the event that the Bylaws used in the incorporation will have a standardized format. For the rest, the incorporation will not take longer than five days.
For the first 3 years from the incorporation, the startup will be exempted from the cause of dissolution for losses related to or generating equity imbalances
Although these new measures have not been already approved, it is likely that the final Act will not defer substantially. Once the new Act enters into force, we will keep you informed of the new rules.
However, it can be said that Spain will become an interesting place to relocate. So, interested on relocating and investing from Spain? Let’s talk, we will be more than happy to help you to land here.