Spanish tax ecosystem for start up companies

The preliminary project of the Spanish Law to foment an ecosystem for start up companies includes new interesting tax measures.

This Law is included in the Spain Digital 2025 Agenda and searches providing a favourable context for the creation and growth of start up companies with a technological background. The new tax measures are focused in the area of Corporate income tax and Payroll taxes.

Pending its approval, it is worth knowing beforehand which will be its main features, that we can already anticipate in the event that the Law is finally approved was its stands right now, without any big changes.

✔ The Law will be focused on start up entities that will be those: recently created or with a maximum of 5 years since their inception or 7 years if included in the biotechnological, energy or industry sector, that have their social domicile or permanent establishment in Spain as well as the majority of their payroll with Spanish contract, not quoted in a stock market, not distributing dividends and not reaching a turnover of 5 million euro.

✔ The tax incentives for this type of enterprises will be focused on:

  • i. Softening the initial taxation of start up entities, by reducing their Corporate income tax rate from 25% to 15% during a maximum of four years, as long as the enterprise keeps the condition of start up entity. It must be noted that newly created entities are already enjoying a reduced tax rate of 15%, under certain conditions, though this advantage is limited to the first fiscal year in which the enterprise’s taxable result is positive and the subsequent one.
  • ii. They will all enjoy the deferral of tax payments during their first two years of activity. The Spanish tax office shall grant the deferment of tax payments without requesting for any guarantee, for a period of 12 and 6 months, respectively, during the two first fiscal years in which the Corporate tax result is positive./li>
  • iii. Taxation on stock options shall be improved, by increasing the annual minimum exempt from 12,000€ to 45,000€, in the case of companies certified as start ups.
  • iv. The tax credit for investment in newly or recently created entities is increased from 30% to 40%, increasing the maximum tax base on which these rates applied from 60,000€ to 100,000€ as well as the time during which it is considered as a start up.
  • v. Last but not least, the access to the special Beckham scheme applying to employees seconded to Spanish territory improves through different measures as it is the increase of the time length to enjoy this scheme or the extension of its benefits to other family members.
  • The preliminary project of the Spanish Law to foment an ecosystem for start up companies includes improvements in the current “Beckham Law” as a measure to decrease the difficulties that technological start up entities have to face to attract and retain collaborators with specialized and scarce profiles.

    This is a special scheme in Spanish Personal income tax that, since it was implemented, it has aimed at attracting foreign talent to Spanish territory. However, it is necessary to update it to compete with neighbouring countries that have become major poles of attraction of human capital and which offer special schemes for individuals that, over time, have evolved as more competitive.

    The new foreseen changes improve the access to this scheme while, at the same time, extend its temporary and personal scope of application.

    ✔ This is a scheme that permits seconded individuals electing to be taxed under the Non resident income tax while, at the same time, keeping their status as Spanish tax residents. They are taxed on Spanish source income only except for employment income that is taxed on a worldwide basis. The election has effects in the Personal income tax and Wealth tax.
    ✔ Individuals are entitled to elect for it when they become Spanish tax residents because of their secondment to Spain and they have not been resident in Spain during the last ten fiscal years previous to that of secondment. It is foreseen that the new rules will reduce this period to the five fiscal years previous to that of secondment.
    ✔ The scheme currently applies to the fiscal year of change of residency and the five subsequent fiscal years. It is foreseen that this five years period will be extended to ten.
    ✔ Individuals can now elect for this scheme on a standalone basis, when they comply with the legal requirements. If the changes remain as foreseen, the spouse and minor dependent children under 25 (or of any age if they are disabled) or when there is no marital status, the single parent, will be allowed to elect for this scheme as well providing that:

    • a. They are seconded to Spanish territory together with the impatriate or within the first fiscal year of application of the scheme.
    • b. Become Spanish residents because of their secondment to Spain.
    • c. Have not been resident in Spain in the last five fiscal years and do not have a permanent establishment in Spain either.

    ✔ These measures are always welcomed since enjoying a beneficial tax scheme and our sun are the best cocktail for us.

    Publicado el 10-2021 por PBS