The new Startup Law comes into effect.

The Full Congress of Deputies has approved the Law to Promote the Emerging Business Ecosystem, better known as the Startup Law. The new Startup Law comes into force and is the first regulation specifically aimed at creating an innovative entrepreneurial ecosystem in Europe. Driven by the Ministry of Economic Affairs and Digital Transformation, through the State Secretariat for Digitization and Artificial Intelligence, the law positions Spain at the forefront of Europe in developing an entrepreneurial ecosystem with an innovative vocation, as well as in the creation and relocation of emerging companies and in attracting international talent and capital.

The Startup Law represents one of the major commitments of this legislature and is part of a set of reforms to improve the country’s business climate, along with the Crea y Crece Law and the Bankruptcy Law, both passed this year. It is also one of the most significant milestones for this year within the Digital Spain 2026 Agenda, the roadmap of the ambitious digitalization plan being carried out by the country.

The approval of the final text by a large majority in Congress comes after months of progress, which began in July 2021 with the start of the public consultation process for the Draft Law, and intense work with different parliamentary groups and sector stakeholders. During this process, more than 80 amendments proposed by the parties have been incorporated with the aim of improving the initial text and strengthening consensus around it.

Some of the improvements included during the parliamentary process and passage through the Senate are as follows:

  • Greater incentives are provided for “serial” entrepreneurship. Founding partners of startups embarking on new projects can benefit indefinitely from the benefits of the law.
  • Rural entrepreneurship is promoted by launching pilot projects in rural areas and aligning the initiatives planned in the Law with the Smart Rural Territory, a project that envisages the incorporation of new technologies in areas such as agriculture, livestock, urban planning, or the environment of villages.
  • Requirements are relaxed and the possibility of retaining talent that completes their studies to seek employment in Spain is incorporated.
  • A special visa for Digital Nomads is created for holders working for themselves or for employers from anywhere in the world on national territory. Main axes to boost the entrepreneurial fabric

With the Startup Law, the Government seeks to stimulate investment and talent attraction, foster collaboration between SMEs, large companies, and startups, promote R&D&I, also in the Administration, and encourage cooperation between startups and entrepreneurs with Universities and research centers.

The law defines the category of a startup company as one that is not more than 5 years old (or 7 for strategic sectors), does not trade on the stock exchange or distribute dividends, has its registered office or headquarters permanently established in national territory, has 60% of its workforce hired in Spain, and has a maximum turnover of 10 million euros.

Likewise, it must demonstrate “innovative character,” understood as the development of new or improved products or services. To this end, seven lines of criteria to be assessed by ENISA have been incorporated, including some parameters such as “degree of innovation,” “attractiveness of the market,” “life stage of the company,” “business model-scalability,” “competition,” or “volume of customers.”

The main objective of the law is to promote administrative agility. For this purpose, a single and telematic window is provided for the certification of innovative companies as Spanish startups (ONE). In addition, non-resident investors will not be required to obtain the foreigner identification number (NIE). Instead, only they and their representatives will be required to provide tax identification numbers (NIF), and the minimum cost of notarial and registration fees will be charged.

The recovery, attraction, and retention of national and international talent are another axis that underpins the law. Therefore, it contemplates facilities for obtaining visas and residence permits for highly qualified workers of startups, as well as for Spanish workers who are not residents for at least 5 years.

Furthermore, it seeks to improve knowledge exchange through general and basic regulation on test environments and sandboxes. In this regard, it will be possible to test startup innovations for a year in a controlled environment to assess the usefulness, feasibility, and impact of technological innovations in different sectors of productive activity.

The text also incorporates significant fiscal measures, such as reducing the tax rate in corporate tax and non-resident income tax, from the general rate of 25% to 15% in the first four years from when the taxable base is positive. It also increases the exemption amount for the taxation of stock option plans from 12,000 to 50,000 euros annually in the case of delivery by startups of shares or participations resulting from the exercise of option rights.

It also expands the maximum deduction base for investment in new or recently established companies (from 60,000 to 100,000 euros annually), the deduction rate (which increases from 30% to 50%), as well as the period considered as recently established, which increases from 3 to 5 years, generally, or to 7 for companies in certain sectors.

The new Startup Law comes into force and places Spain at the forefront of Europe

The new Startup Law comes into force and is the first specifically aimed at creating an innovative entrepreneurial ecosystem in Europe.

Spain has shown proactive and cohesive willingness in promoting excellence nations for entrepreneurship in Europe, as demonstrated by being founders of the ESNA (European Startup Nation Alliance) along with Austria and Portugal. This alliance is aimed at generating a coordinated digital entrepreneurship ecosystem in Europe with the aim of doubling the number of technological unicorns in the EU by 2030. A large-scale challenge where Spain is consolidating its leadership thanks to initiatives such as the recently approved regulation.

Our country leads the ranking in terms of fear of failure as an obstacle to entrepreneurship, with 64% of the population compared to the global average of 47% (GEM 20-21 Report). And yet, it has established its entrepreneurial ecosystem in the top 20 worldwide, above the European average (GEM 20-21). The Startup Law represents an opportunity to reverse this trend and definitively position Spain as the digital talent hub of the EU.

Following its final approval in Congress, it is expected that the Startup Law will come into force at the beginning of 2023.

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