Important tax and immigration changes
The Spanish government has recently approved the first draft of a law with several immigration and tax advantages for startups and digital nomads. The aim of this law is to promote the ecosystem of emerging companies and to attract talent and international capital for the development of innovative entrepreneurial activities in Spain.
This new law is a dramatic change from the current situation where there are significant administrative and bureaucratic hurdles for innovative SMEs with regards to taxation or the processing of visas. Spain now intends to simplify and make more flexible all the activities that emerging companies must carry out when beginning their activities as a Spanish legal entity.
At this stage it is just the draft of the Law. It must be definitively approved by the Spanish Parliament (expected before the end of the year 2021)
Favorable Tax regime for Start-ups
Spanish startup ecosystem is expected to receive a massive boost in attracting talent and capital under this new law as it consists of important measures are incorporated to promote the attraction of international talent and facilitate the creation of digital hubs in Spain.
Most significant are the proposed changes to the Corporate Income Tax and non-Resident Income Tax for startups, from the general rate of 25% to 15% in the first tax period in which the tax base is positive and in the following three if it maintains the qualification of an emerging company.
In addition, these startups will have the possibility to request for a deferral of the Corporate Income Tax amount to be paid for two years without accrual of interest for late payment, for a period of 12 months.
A favorable tax regime will also apply to stock options for employees. Specifically, the amount of the exemption is raised from 12,000 to 45,000 euros per year. Also, the conditions for the generation of treasury stock in limited liability companies are made more flexible.
Finally, another great initiative included in the draft is related to “digital nomads“. This segment of the economy, especially following the Covid-19 pandemic, is one that Spain intends to support with modifications to the tax and immigration systems. Spain will create a specific tax regime so that these remote workers (and their families) residing on Spanish territory will be subject to income tax for non-residents being taxed at fixed rate of 24%, relaxing the requirements to access this regime and extending the period of their enjoyment from 5 to 10 years.
At the same time Spain will create a specific visa for highly qualified foreign professionals working remotely in Spain for a foreign company or as a free-lancer. The digital nomad visa will have a validity of one year, and once in Spain, the digital nomads would be able to apply for a residence permit for a maximum of 2 years. If the applicant is already in Spain, then they will be able to apply directly for a resident permit with a maximum term of 2 years.
This draft Law for the Promotion of the Ecosystem of Emerging Companies has among its main objectives the promotion of investment in the entrepreneurial ecosystem of Spain. To that end they are proposing the maximum deduction base for investment in new or recently created companies is increased (from 60,000 to 100,000 euros per year), the rate of deduction (which goes from 30 to 40%), as well as the period in which it is considered of recent creation that rises from 3 to 5 years or even to 7 for companies in certain sectors.
Cutting the administrative burden for companies
With the aim of facilitating and streamlining entrepreneurial activity the current obligation to make advanced payments of Corporation Income Tax and income tax of non-residents in the 2 years after the one in which the tax base is positive is eliminated.
In addition, the draft removes the current obligation to obtain the foreigners identification number (NIE) for non-resident investors, requiring only that both they and their representatives obtain the tax identification numbers (NIF).
And finally, considering that the potential failure of a start-up must be accepted as a fact of life that unfortunately happens, the procedures for the cessation of activity are streamlined and will be able to be completed electronically.
Avalanding closely monitors the situation surrounding this new Digital Nomad law and we would be glad to discuss with you the possible advantages for your work and life in Spain.