Spain still remains an attractive destination for digital nomads, remote workers and entrepreneurs from all around the world. Spain itself also tries to come up with some benefits and measures by the introduction of their Spain Startup Law.
Let’s have a closer look at these.
What is the New Spain Startup Law?
The Spain Startup Law is also known as Law 28/2022. The law was officially enacted on 1 January 2023. By introducing this law, Spain tries to attract entrepreneurs, remote workers and digital nomads to the country. It does this by providing all kind of benefits from specific visas to tax incentives.
The Startup Act intends to meet different objectives:
- Stimulate the incorporation or transfer of startups to Spain
- Simplify the administration startups have to go through
- Increase collaboration between educational institutions and companies
- Facilitate investment in startups
- Get talented people to move to Spain by offering visa options and tax incentives
We will discuss these objectives more in detail later in this article. Let’s first assess to what extent the Spain Startup Law benefits digital nomads.
Is the Startup Law in Spain Useful for Digital Nomads?
The Spanish Startup Law is definitely useful for digital nomads.
The first reason for this is that the law introduced the Spanish digital nomad visa.
The Spanish digital nomad visa allows individuals to stay in Spain for up to one year. However, before the expiration of the digital nomad visa, you can convert it to a residence permit.
This residency permit is valid for three years. After those three years, you can renew for two more years if you still meet all conditions. In that way, Spain allows you now to stay there for up to five years. And after those five years, you could apply for permanent residency.
With the digital nomad visa, Spain opened the gates for remote workers who want to set up their base in the country.
Furthermore, the Startup Law also made some changes to the already existing Beckham Law. We’ll have a closer look at this later on.
Definition of a Startup Under the New Law
Apart from the benefits for digital nomads and remote workers, the law also provides benefits to companies that qualify as a startup.
In order to qualify as a startup, a company needs to meet certain criteria:
- Be a newly established company or in any case the company can’t be older than 7 years (similar conditions apply if the company originates from a spin-off or similar transaction)
- Don’t distribute any dividends
- Not be listed on a stock exchange
- Have a registered office or permanent establishment in Spain
- At least 60% of the staff should work in Spain through a labour contract
- Develop an innovative entrepreneurial project with a scalable business model
- Annual turnover of less than mEUR 10
- Conform with tax and social obligations
- No conviction of any crimes
Yet, just meeting these requirements is not sufficient. In order to get recognized as a startup, you need to get a certificate of the National Innovation Company (ENISA).
Apart from the aforementioned conditions, ENISA will also check the following criteria to assess your qualification as a startup:
- Innovation level
- Market attractiveness level
- Company life stage
- Business model
- Competition
- Team
- Dependency on other providers
- Customer base
Basically this means that if you want to apply for a qualification as a startup, you need to prepare a whole file discussing of these elements. Once you have filed your application, ENISA has three months to review your request.
So, although one of the objectives of the startup law was to simplify administration for startups, you still need to go through a whole process in order to obtain this qualification.
Key Measures of the Spanish Startup Act
The Spain Startup Law introduced a different spectrum of key measures to attract entrepreneurs, digital nomads and remote workers.
The Spanish Startup Law provides for measures and benefits on various levels:
- Introducing the concept of startups according to Spanish law
- Providing corporate income tax benefits to companies qualifying as a startup
- Providing personal income tax benefits to individuals connected to or working for Spanish startups
- Amendments to the beneficial tax regime called the Beckham Law
- Introducing the Spanish digital nomad visa allowing third-country nationals to stay in Spain for an extended period of time
Let’s have a closer look at how this translates in practical measures.
Establishment National Entrepreneurship Office
The Spanish Startup Act established the National Entrepreneurship Office (ONE).
ONE is a particular department setup within the Ministry of Industry, Trade and Finance. It should help entrepreneurs with things like getting funding (e.g. crowdfunding, venture capital, etc.) and grants.
Tax Incentives for Companies under the Spain Startup Law
A company that qualifies as a startup under the Spanish Startup Law will benefit from a decreased corporate tax rate.
The tax rate is 15% instead of the normal tax rate of 25%. However, this beneficial tax rate is limited in time. It will apply for the first year with taxable income and the four years after.
Furthermore, startups can defer the payment of the taxes that are actually due. For the first two years, you can respectively defer the payment for 12 and 6 months. As part of this measure, you also don’t need to make corporate tax prepayments throughout the year during those first two years.
Personal Income Tax Incentives
The Spanish Startup Act also introduced and changed some tax benefits regarding personal income tax for individuals connected to these startups. This enables startups and connected individuals to pay lower taxes on stock options, get a tax deduction for investing in the company, etc.
However, more importantly, Law 28/2022 also made some changes to the so-called Beckham Law.
The Beckham Law allows individuals who move their tax residency to Spain to benefit from a beneficial tax regime for a limited amount of time if you meet certain criteria.
The main benefit of the Beckham Law is that you can pay a fixed personal income tax rate of 24% instead of the progressive tax rates. Furthermore, you won’t pay any Spanish tax on investment income from abroad.
Yet, the attention point is that the Beckham Law generally only applies to remote employees and not to freelancers.
Introduction Spanish Digital Nomad Visa
Apart from enabling some changes to the Beckham Law, the Spain Startup Law also did something else for remote workers. As mentioned before, the law also introduced the Spanish Digital Nomad Visa.
Via this way, remote workers and digital nomads who need a visa to stay in Spain can use this option to secure a long-term stay in Spain.
Conclusion
The Spanish Startup Law introduced many new measures.
The main focus of the law is to introduce the concept of a startup in Spanish legislation and link certain benefits to it. This is probably less interesting for the average digital nomad or remote worker.
However, the law also includes some provisions which are important for those with a location independent lifestyle.
First and foremost, there is the introduction of the digital nomad visa and the digital nomad residence permit. This measure opens the door for people who want to stay in Spain longer than a tourist visa allows them.
Furthermore, there are the adjustments to the Beckham Law which is in any case an important tax regime if you’re considering moving your tax residency to Spain.
