Income Declaration for the Period 2023
April 16, 2024
Surely by now you have heard about the new law created to foster entrepreneurship in Spain, which will come into effect in January 2023. This new law has a lot of new features that will make it far easier for new startups to make it to get off the ground.
We can’t wait to see what this new upcoming law can do for Spanish entrepreneurship. If you are also curious about this topic, read on!
The new startup law in Spain aims to incentivize entrepreneurship, lower taxes, and reduce bureaucracy. It will come into force in January 2023 and has advantages such as tax exemption in terms of stock options up to a certain limit, it also advocates a fixed tax rate of 15% as opposed to the 25% established in the Corporate Tax Law. This tax rate will be in force during the first year of activity as long as its taxable income, or “Base Imponible”, is positive. It also has many other fiscal and administrative advantages that we will look at shortly.
This new law is good news for entrepreneurs in Spain. It will reduce the tax burden of the companies and will facilitate the creation of new ones. The new law is one of the measures included in the Recovery, Transformation and Resilience Plan, and aims to bring Spain in line with the European entrepreneurial standard.
According to the new law, corporate tax will be reduced to 15% over a period of four years for those companies that have a positive taxable base, i.e., if we have any type of profit for which we have to pay tax, this would be at 10% less than the rest of the companies present in Spain. In addition to this, the existing bureaucratic obstacles when creating a company will be eliminated, simplifying the process as much as possible.
Finally, the use of stock options as remuneration will be facilitated and their tax exemption will be increased. Stock options are a very attractive financing option through which employees can invest in the company where they work. The purpose of this measure is to converge the interests of shareholders and employees, since the higher the share price, the more they would both gain.
The new law, known as the Startups Law in Spain, is designed to encourage entrepreneurship. Among its many advantages, the law offers tax exemptions to startups that meet certain criteria.
According to the law, for a company to be considered a Startup, it must not be more than five years old (7 for strategic sectors), must not be listed on the stock exchange or distribute dividends, it must be headquartered or have its main office in the Spanish territory.
In addition to the above, they must have 60% of their workforce employed in Spain and their total sales volume must not exceed 10 million euros.
If your startup meets these requirements, it is advisable to take advantage of this new law. And even if your startup does not meet all the above criteria, you may still be able to benefit from some of the other advantages included in the law.
And as mentioned above, the new law has many tax and administrative advantages. However, not all newly created companies will be able to take advantage of it. Companies wishing to take advantage of the law will have to demonstrate an “innovative character”, i.e., they must develop new or clearly improved products or services.
Spain hopes to further encourage entrepreneurship with a new law that will come into force early next year. The new law has several benefits, including a reduced tax rate for the first year, and a few administrative and fiscal benefits. If you are thinking of setting up a business in Spain, or have recently set one up, this is something to consider.
Employing in Spain wants to help you make the most of this new law, which is why we provide you with the best professionals in the sector to advise on the best way to do so. Get in touch today and schedule your next meeting!
