On December 10, 2021, Spain’s Council of Ministers adopted the draft of the Spanish Startups Law, a piece of legislation intended to promote the country as an attractive destination for foreign startup founders, entrepreneurs, and remote workers.

In an article published by Spain’s Vice-President and Minister for Economy and Digitalization, Nadia Calviño, she outlines sweeping changes to Spain’s regulations pertaining to foreign startups wishing to launch in Spain.

The now-approved draft Startup Law, which forms part of Spain’s much vaunted Recovery Plan, seeks to reduce the red tape associated with setting up and doing business in Spain, and also contains provisions for an attractive set of tax incentives.

Spain is cognisant of digital startups’ potential for hypergrowth and job creation, and understands that these businesses don’t necessarily fit in well within a traditional regulatory context.

The newly adopted draft legislation seeks to remove 5 key obstacles and friction points foreign startup founders and entrepreneurs face in launching an enterprise in Spain:

  • Firstly, the Startups Law creates a set of eligibility criteria under which new, innovative Spanish startups with revenues of up to €5 million per year (either newly established, or under 5 years old) can qualify for a raft of benefits. For startups focused on biotech, sustainable energies or industrial processing technologies, the age limit is lifted to 7 years.

  • Secondly, qualifying Spanish startups will enjoy a reduction in their applicable corporate tax and non-resident tax rates from 25% to 15% for 4 years (compared to the 10-year exemption on the Portuguese NHR Program).

    The tax-deductible threshold will be increased to 50%, with a maximum deduction base of €100,000 per year for investors and entrepreneurs.  Venture capital funds investing in Spanish startups can also look forward to more beneficial tax treatment.

As an added benefit, employees receiving stock options will enjoy an exemption of up to €50,000 per year (previously only €12,500). Tax payments associated with the “liquidity event” can be deferred for a maximum of 10 years. In addition, double social security contributions for moonlighting workers will also be eliminated.

  • Thirdly, the Startups Law seeks to reduce administrative red tape. Going forward, third country nationals will be able to register a Spanish Limited Company online within 6 hours, without any notary or registration fees.

  • Fourthly, in order to roll out the red carpet for the employees required to staff these startups, the Startup Law makes provision for streamlined visa options for highly qualified startup workers, founders, entrepreneurs and digital nomads.

(This would be Spain’s second foray into digital nomad visas. The previous proposed iteration of their digital nomad visa was criticised roundly for comparing very poorly against competing visa programs such as the Malta Nomad Residency Permit and the Portuguese D7 Visa, especially in terms of  its double taxation of nomads.

While the latter was initially launched as an option for financially self-sufficient retirees, the Portuguese authorities understood, as early as 2020, the value of this visa legislation as a gateway for remote workers and digital nomads to come to Portugal.

And with the existing framework of the Portuguese Non-Habitual Residency Tax Status already in place, Portugal experienced a tsunami of demand from foreign knowledge workers, in particular. 

Moreover, Spain is playing catch-up on another front too: Portugal was the first to market with a more affordable Golden Visa alternative, in the form of the HQA Visa. The Highly Qualified Activity (HQA) Visa Program is an excellent option for foreign entrepreneurs and founders looking to seed an option on a new life in Portugal – without the need to move there.)

It is anticipated that the Spanish Startups Law will help the country address the obvious challenges associated with their earlier program prototype, and thereby position Spain as one of the top destinations for foreign startup investments and digital nomads.)

Finally, the approved draft Startups Law seeks to lubricate the interaction between foreign investors, startup founders and digital nomads, and the Spanish public administration system.

Some of the provisions made to achieve this include the issuance of temporary trial licenses for startups in regulated industries, as well as the promotion of innovative public procurement and public-private collaborations between STEM students and graduates, startups and universities.

In light of the above legislative amendments, Spain is well positioned to nurture its startup ecosystem and attract both foreign investment and specialized talent in the coming years.

Combined with ongoing investment in public and digital infrastructure, R&D centers and exceptional higher learning institutions, the Spanish Recovery Plan will help Spain position itself as a dominant Startup destination.

And given the country’s vibrant culture, sumptuous cuisine and exceptional quality of life, it shouldn’t be too hard an objective to achieve.

Download the Spanish Government’s official press statement regarding the Startups Law’s approval and implications here (PDF).

About the HQA Visa Program

Priced at only €175,000, all-in, the HQA Visa Program minimizes investors’ opportunity costs, whilst delivering the same flexibility and optionality as a Golden Visa.

Given the extremely competitive pricing, and the program fast becoming known around the world, industry insiders expect both Portugal and Spain’s Golden Visa offerings to lose market share to the HQA Visa in 2022…

To find out more about the HQA Visa, click here.