Start Up Law

With the approval of the Start Up Law, which is expected to come into force by the end of 2022, the Government is trying to solve one of the underlying problems that placed Spain at a clear competitive disadvantage compared to neighbouring countries, which corresponds to the lack of regulation that would allow it to both retain and attract talent and investors.
 
Until now, Start Ups have been governed by the Capital Companies Act, most of them adopting the Limited Liability Company as their legal form, which is burdensome due to its lack of adaptation to fast-growing and highly invested projects.

Start-up Law comes to regulate and slacken the procedures through which Start Ups communicate with the administration, thus favouring the appearance of more and more companies of this type, reduce the tax burdens they bear, adapt the applicable regulatory framework so they can profit from certain advantages, etc. with the final objective of, as previously mentioned, attracting talent and capital to push forward Spanish R&D&i in order to adapt our economy to the digital economy.

The Law has been well received by the vast majority of public opinion, and certain interesting aspects of it are worth highlighting, for example, the new tax treatment of “stock options”, whose tax exemption will be increased to €50,000, the reduction in the Non-Resident Income Tax rate for the first 4 years, the regulation of the taxation applicable to "digital nomads", who will be able to reside and work in Spain for 5 years being subject to Non-Resident Income Tax, or the increase in the maximum deductible amount for investments in new or recently created companies from €60,000 to €100,000 per year in order to favour entrepreneurs and investors.

Nevertheless, there are certain reserves because, although the sector describes this measure as "well-intentioned" or as "a good starting point", it seems that it does not meet the needs of Spanish entrepreneurs, who begin by criticising, firstly, the definition given to the concept of "Start Up", which is considered too restrictive. They argue the need for it to be broadened as the current wording leaves out many business models with accelerated growth but requiring large capital investments for longer periods of time than those foreseen in the Law.

If we add to this, among other things, the lack of support to the figure of the “serial entrepreneurs” and the bureaucratic obstacles that still exist in our country for attracting foreign investment, we can see that the measure could be more ambitious and that it will be necessary to review it in order to place our country in a competitive position compared to countries such as France or Germany.

In conclusion, it should be noted that the legislative recognition of this business model, together with the fiscal measures contained in the law, represents, albeit limited, a step forward for the Spanish regulatory framework, which recognises the great importance of entrepreneurship in the economy and which, with the approval of the Law, not only seeks to protect it but also to promote it. However, a new impulse will be needed to make this sector one of the real engines of the Spanish economy.