New Start-up Act: Legal changes in Spain to compete for international talent attraction

The new Start-up Act is a reality!. The Spanish Congress of Deputies has approved today the new Act that will change the tax, legal and immigration regulation to attract talent, projects and investors.

New Start-up Act: Legal changes in Spain to compete for international talent attraction

Spain has further improved its current legal framework for digital nomads and international entrepreneurs thanks to the New Start-up Act 2022.

Relevant changes have been introduced in tax rules, but also in legal and immigration rules, with the aim of removing legal obstacles for foreign professionals wishing to become part of the European country’s labour framework.

It is a reality that Spain is competing for a better position in the international market for attracting talent for its technological ecosystem, as well as for medium-high net worth individuals.

Beyond the quality of life offered by the country, it was more than necessary to change and improve the New Start-up Act to make it easier for businesses to progress their commercial activities.

What does it consist of and what are the tax benefits of the startup act? Let’s see it in this post.

The Congress of Deputies announces the New Start-up Act in Spain for 2023

Today, December 1, 2022, the Congress of Deputies has approved the final text of the Start-up Act that will come into force in early 2023.

Initial debates between political parties began in 2018, but today a broad majority has decided to move forward with these changes that favour the nation’s progress in skilled labour and commerce.

The legislation aims to regulate efforts to attract talent and investment in technology-intensive companies and cut the bureaucratic requirements for forming new entities, which are one of the best benefits of the New Start-up Act.

Thanks to this new regulatory framework, Spain and its main cities with a relevant startup ecosystem, such as Madrid, Barcelona, Mallorca and Malaga, among others, will be able to make progress in attracting new high value-added investment projects.

Main measures of the draft Start-up Act (subject to final approval)

Let’s take a tour of the measures of the new law for startups in Spain.

Tax benefits of the startup law for newly created companies

The corporate income tax rate is reduced from 25% to 15% for a maximum of 4 years and from the first year in which the entity is in profit.

The tax instalments to be paid may be deferred for two years without interest, which shows an excellent improvement with respect to previous startup laws.

A new tax framework for entry into Spain

Expatriates will be able to opt to benefit from the special regime which allows them to be taxed at a flat rate of 24% on their Spanish income, but nothing on the rest of their worldwide income.

This special regime will be applicable for a period of ten years in some cases (currently five years).

The requirement of not having been considered a tax resident in Spain in the 10 years prior to expatriation has been reduced to 5 years.

Better taxation for stock-option plans

Stock options will be taxed once they are exercised, i.e. when they are sold. Up to 50,000 euros will be tax-free.

Tax deductions for investors in startups with a high technological component

Individuals who invest in startups will be subject to a more favourable tax regime for the profits obtained from the investee companies and for the profits obtained from the management of this fund.

Startups with more beneficial interest for entrepreneurs

The interest carried forward will be taxed as earned income (progressive scale up to 54% depending on the autonomous community where the taxpayer is based) but with a 50% exemption.

A new visa for digital nomads

Foreigners not residing in Spain who wish to live here and work remotely for a company outside Spanish territory will be able to apply for a new international telework visa.

This visa will have a duration of one year but may be renewed for two more years, with the possibility of obtaining another extension if the conditions to qualify for this visa are met and with a real possibility of obtaining permanent residence after a period of five years.

On the other hand, the tax regime for digital nomads will allow them to be taxed in Spain at a flat rate of 15% on the first 600,000 euros of income.

The Spanish identification number requirement for foreigners will be relaxed

The Law extends from 3 to 6 months the term to obtain the NIE. This rule will facilitate compliance with labour and tax regulations.

Easier requirements to obtain student work permits

The New Start-up Act establishes that international students enrolled in courses at higher education institutions who intend to stay and work, start a business or do research in Spain will obtain a guaranteed work permit for 2 years after finishing their studies.

Greater flexibility in the incorporation of Spanish Newco

Notary and registry fees will be eliminated if the company is incorporated electronically.

The company can be registered in the Mercantile Registry in only 6 hours if the Articles of Association used in the incorporation are in a standardized format.

Otherwise, incorporation will take no more than 5 days. This is one of the best advantages of the Start-up Act BOE for 2023.

During the first 3 years from incorporation, the startup will be exempt from the cause of dissolution for losses related to or generating equity imbalances.

So, are you interested in relocating and investing in Spain? We have helped other businesses like yours. Let’s talk, we have a team of advisors and experts who will be happy to help you land here.