Spain Moves Closer to Passing a Startup Law

Spain Moves Closer to Passing a Startup Law

Spain’s administration has agreed on the provisions of a draft startup legislation, handing the idea over to the parliament to discuss and maybe change before a vote to make it law. The Council of Ministers today announced the acceptance of a draft document that, according to the Council, contains key steps to reduce red tape and remove regulatory barriers to starting and investing in businesses in Spain. In order to make the nation more appealing to entrepreneurs and digital talent, the package also includes revisions to stock options and visa access.

Spain’s government said in a news release that the incentive package included “the EU’s most favorable handling of stock option returns.” Ministers have decided to increase the stock option income tax exemption from €12,000 to €50,000 per year.

Taxation is also postponed until either the day of settlement, which is when the stocks are sold or when the firm goes public, according to the draft. Other important tax reforms include a four-year decrease in Corporate Tax and Non-Resident Income Tax (from 25% to 15%), which tries to address a major hurdle, given that startups aren’t often focused on earning revenue in their early years (yet, under the current rules, are expected to pay the same rate of tax as more established businesses).

Spain Moves Closer to Passing a Startup Law
Spain Moves Closer to Passing a Startup Law

According to the draft accepted by ministers, the maximum deductible amount for investments in new or recently founded firms is increased (from €60,000 to €100,000 per year), the deduction rate is increased from 30% to 50%, and the time for deeming a company “recently created” is prolonged. The change appears to address another major issue of Spanish entrepreneurs: the high cost and paperwork of starting a firm in Spain, which has encouraged some entrepreneurs to set up shop abroad in Europe even if they later construct their product out of offices in the nation.

Ministers claim that under the draft law, the procedures for forming a corporation would be “streamlined” into a single step that may be accomplished online without the need for a notary or register fees. According to the press release, startups will be able to file company statements and get advantages using an online platform.

Olivier Plante, the co-founder of ThingThing, a local keyboard firm that produces Fleksy (a keyboard SDK business) from headquarters in Spain, stated he felt compelled to incorporate his company in the United Kingdom in 2015 due to relative expenses. He continues, “We went like three years without making a dollar.” “In the beginning, we required a lot of money to get started, such as for register, stocks, banks, notaries (who are parasites honestly), and so on.” That’s why we started the corporation in the United Kingdom, where it costs us 70 pounds instead of 5 thousand euros in Spain.”

Plante praised the reform package, noting that the two most essential elements for him are making it easier to set up a business and lowering corporate tax rates in the early years. According to Plante, the present strategy is effectively “killing entrepreneurial spirit from day one,” or else restricting the pool of potential founders to those who can save enough money to get started. “Real entrepreneurs often have fewer resources,” he said, adding, “And Spain does not allow the poor to become wealthy at the source.”

The acceptance of the draft document by the Council of Ministers was also applauded by a local startup organisation, startups asociación espaa, but it stated that it is still waiting to read all the specifics of the entire text once it published. The group gushed about the proposed increase in the tax credit for startup investors, calling it “great news that puts us on an equal footing with other thriving ecosystems.”

However, it is unclear how the parliament would change precise elements. In terms of timing, a government source told that the bill expected to pass in the first half of 2022, but the timeframe permits until the end of the year.

In terms of money, Spain’s government has set a goal of investing up to €4 billion in supporting startup growth, including using European Union coronavirus recovery funds, Check out the interview with Francisco Polo, Spain’s high commissioner supervising the delivery of the entrepreneurial strategy, from earlier this year for a deep dive into the country’s ten-year plan for startup reform.