On December 1st, 2022, the Law fostering the ecosystem for emerging companies, better known as the “Startups Law”, was approved, and has already entered into force.
But, what exactly is a Start-up or an emerging company?
The Start-ups Act define these as innovative, knowledge-based, digital, and fast-growing companies. These must be companies, whether commercial companies or cooperatives, newly created or which have not been registered in the competent Register for more than 5 o 7 years, with their registered office or establishment in Spain, with 60% of their workforce having an employment contract in Spain, and which develop an innovative entrepreneurial project with a scalable business model.
Therefore, its purpose should be to provide a solution to a problem or improve an existing situation by developing new or substantially improved products, services or processes compared to the state of the art and that imply a risk or uncertainty abuot the success of its business model. They have high growth potential and depend on attracting and retaining highly skilled workers.
Accreditation as a Start-up
In order to be considered an “emerging company”, National Innovation Company SM3 S.A. (ENISA, for its initials in Spanish) must validate that all the requirements established by the Act are fulfilled prior to the registration of such recognition in the Companies Register or in the Register of Cooperatives.
Purpose of the Startups Law
The purspose of this regulation is to establish measures to ease the creation and growth of this type of company. This is intended to be achieved through benefits and novelties aimed at (i) reducing its tax burden; (ii) facilitate investment in Startups, (iii) help them retain and attract talent and (iv) reduce administrative obstacles and grant flexibility in the management of these companies.
Main measures introduced by the Startups Law
Measures are introduced ate the fiscal, labor, corporate and administartive levels. We highlight the following:
- At the tax level, the tax rate is reduced from 25% to 15% during four tax periods. In addition, it is allowed to defer the payment of the tax deby during the first two deduction for investment in new or recently created companies is also increased and improved. Improvements are introduced in the taxation of purchease options on shares or participations (stock options) in the IRPF granted to employees.
- At the labor level, a 50% bonus is regulated in the income from work obtained by administrators, employees or managers of certian entities and investment funds (the so-called carried interest). It also extends the scope of application of the impatriate regime and facilitates the stay and permanence in Spain in various cases by bowls of economic interest. A bonus of 100% of the general minimum quota of self-employed workers is stipulated for workers who are self-employed by dedictaing to an emerging company and simultaneosuly, work as an employee.
- At the corporate level, the treasury stock regime of emerging companies is made more flexible so that they can execute a remuneration plan or incentives in favor of administrators, managers, or collaborators.It is exempt from incurring in cause of dissolution for losses until three years have elapsed since its constitution provided that the declaration of bankruptcy does not proceed.Measures are regulated to achieve greater registration agility in the constitution of these companies and lower costs in notarial and registry fees.
- At administrative level, in certain sectors, they may apply for temporary trial license for one year.