Tips for investing in a “start-up”.

If you invest in a "start-up", in addition to obtaining a return, you can take advantage of the tax benefits offered by the regulations.

The approval of the Law to promote the ecosystem of emerging companies, better known as the "Startup Law", has been in the news in recent days, although it is still pending Senate approval.

This Law recognizes a series of benefits in favor of emerging companies, consideration that they will have if they meet the legally established requirements.

The company must meet a certain age requirement - be newly created or a maximum of five years since its incorporation and seven years in the case of the biotechnology, energy, industrial or other sectors depending on the state of technology - be independent, have its registered office or permanent establishment in Spain, as well as a majority percentage of the workforce with contracts in Spain, have an innovative character, not be listed or have distributed dividends and not reach a turnover exceeding five million euros.

Even if they meet the stated requirements, companies founded or managed by a person who is not up-to-date with their tax and social security obligations, who has been convicted by a final judgment for certain economic crimes, or who has lost the right to contract with the government, will not be eligible for the benefits of this law. The "emerging company" designation is granted by ENISA (National Innovation Company, SA) through a process in which the law establishes tacit approval if the government does not issue a decision.

The benefits granted are numerous, firstly at the tax level, easing corporate taxation by reducing it from 25% to 15% for the first four years and extending the deferral of tax debt payments for the first two years of operation. The tax exemption forstock options, that is, compensation paid to employees through shares in the company, is also increased.

Furthermore, measures are being implemented to facilitate entrepreneurship and investment by foreign nationals, reducing bureaucracy, computerizing procedures, and even allowing adjustments to the compensation policy.

It promotes "regulatory sandboxes" —spaces where general regulations are waived, under the supervision of a regulatory body or entity, to evaluate the usefulness, viability, and impact of technological innovations in different sectors. Startups are given the opportunity to conduct trials for up to a year in an environment controlled by the relevant regulator. Public-private collaboration is encouraged.

The law can be considered a good starting point for boosting startups in Spain; however, there are elements, such as the demanding legal concept of the emerging company, that would have to be made more flexible to truly make investment in startups an attractive field and to truly make the present a good time for this type of entrepreneurship.

You can contact this professional office for any questions or clarifications you may have.

Warm regards,