On 21 December 2022, the Spanish Parliament (the Cortes Generales) approved the Law on promoting an ecosystem of startups, known as the ’Startup Law’, which came into force on the next day.
The Startup Law provides for the main tax benefits and social guarantees that are listed below.
- Changes in the special tax regime which has been established by the ‘Beckham Law’[1]
This regime (the ‘Beckham Regime’) will apply not only to hired employees who are relocating to Spain under an employment contract, but also to highly qualified specialists, digital nomads, entrepreneurs and investors who have moved to Spain.
For the purpose of applying the Beckham Regime, the period of residence outside Spain before relocation has been reduced from 10 to 5 years.
The restriction is being also abolished with regard to holding issued capital for those directors who have moved to Spain to run a local company. From now on, such directors who hold more than 25% of the issued capital in the companies they head up may also claim eligibility to apply the Beckham Regime.
Exceptions will include directors of an entidad patrimonial (companies in which over half of the assets are not used in business activity). Such directors, as before, cannot lay claim to the special regime.
The period during which a person may apply to use the Beckham Regime has been increased from 6 to 12 months starting from the date of actual relocation to Spain.
Finally, the Beckham Regime may be applied not only to persons who have relocated to the country and who are directly covered by it, but also to their spouses and children under 25.
- Migration measures to incentivize international remote working: a digital nomad visa (DNV)
A key measure has been the introduction of a new visa designed for digital nomads which allows them to relocate and live in Spain for 5 years, provided that they work remotely either as a freelancer or for a foreign employer.
Other requirements include:
- Not more than 20% of the work of a freelancer should be attributable to Spanish companies.
- An employee should have been working for a foreign employer for at least three months.
- An employee’s employment contract should provide for remote working.
- By the time an applicant relocates to Spain, the employer company should have been carrying out its business operations for a year or more.
A DNV allows for similar conditions to be granted to spouses as well as the dependent children and parents of a recipient of a DNV.
After the validity period of a residence permit expires for a recipient of a DNV, the applicant and his/her family may apply for a long-term residence permit, which allows them to live and work in Spain.
A holder of a DNV may be covered by the Beckham Regime which allows him to apply a flat personal income tax rate of 24% to the first EUR 600,000 of income (with income above this amount will be taxed at a rate of 47%) and the applicant will be exempt from taxes on foreign income and property, subject to various exceptions.
- Tax optimization for investors in startups (business angels).
Starting from 2023, the amount of the investment tax deduction for business angels who are resident in Spain and invest in newly or recently founded startups with regard to income tax will be increased from 30% to 50% of the invested amount, while the maximum amount of such investment will also rise from EUR 60,000 to EUR 100,000.
Such an investor will not be required to obtain a foreigner’s identification number (NIE); it will suffice to obtain a taxpayer identification number in Spain (NIF) by following a simplified procedure via the Internet.
- Changes in the taxation of corporate income tax for startups.
For a startup, the profit tax rate will be 15% (in contrast to 25% for an ordinary company) in the first fiscal period when the company generates profit and for the next 3 years provided that the status of a startup is retained.
[1] A situation when a reduced personal income tax rate (24%) applies to certain categories of immigrants who have relocated to work for a Spanish company with respect to the first EUR 600,000 they earn.