With a low cost of living, some of the best internet speeds in the EU and plenty of warm weather, Spain is already a popular destination for remote workers. The Spanish government wants to make life easier for these digital nomads and startups in Spain. Therefore it has adopted a draft Startup Law.
This will place Spain at the forefront to attract investments, innovative entrepreneurship, and talent. The draft law takes into account important tax issues and removes bureaucratic obstacles. Thus, the procedure to create and invest in “startups” will be cheaper and more flexible. It also contains measures to attract international talent and to rediscover domestic talent. Moreover, it will encourage remote workers and digital nomads in Spain.
Setting up a company into just one step
The procedures for setting up a company will be streamlined into just one step. This will be simple and can be done online without the expense of notary or administration fees. A “shop window” will be created for the declaration of the nature of the startup business. Furthermore, it will also provide access and information on any benefits available.
Tax incentives for startups, investors and employees
Significant tax incentives will be established for “startups”, investors, and employees. This will include the EU´s most beneficial treatment of returns on stock options.
Other tax measures will be introduced including a reduction in Corporate Tax and in Non-Resident Income Tax. This will drop from 25% to 15% for four years.
There will also be an interest and deposit-free deferral of tax debt payments for the first two years in which taxable income recorded may be deferred, without requiring any deposits or late payment interest. This would be for a period of 12 and 6 months, respectively.
The maximum amount deductible for investments in new for recently created companies is currently €60,000. This will be increased to €100,000. And the period for companies to be considered “recently created” will also be extended. This will move from 3 to 5 years in general, or to 7 years for companies in certain sectors.
Furthermore, the obligation to pay by instalments on Corporate Tax and Non-Resident Income Tax will be eliminated for the first 2 years after taxable income is first recorded.
The use of stock options as a payment method will be encouraged. Furthermore, the tax exemption on this income will be raised from €12,000 to €50,000 per year. Taxation will also be delayed until the date of settlement. This is either when the stocks are sold, or if the company goes public.
Attracting digital nomads
To attract talent, the regime has been improved for Non-Resident Income Tax. This is applicable to executives and startup employees, investors and “digital nomads” (people who temporarily settle in Spain and work remotely) and their families, who are eligible for a special visa for up to 5 years. These individuals will have the option of residing and working in Spain for 5 years. They will also be eligible for a special tax regime, paying Non-Resident Income Tax.
The draft Law will encourage talent to return to Spain by reducing the previous non-residence period in Spain from 10 to 5 years to have access to this special regime.
As a social incentive, entrepreneurs with multiple jobs will not be required to contribute twice to the Social Security system for a period of 3 years.
Collaboration with public authorities, universities, public research organisations and technology centres will be encouraged by providing for the creation of sandboxes, or trial licences in regulated sectors.
The Government has made available financial resources to nurture the growth of startups. This includes FondoICO Next Tech, with an investment target of up to €4 billion, and the Empresa Nacional de Innovación (ENISA) addressed to emerging companies led by women, with a budget of €51 million, aiming to reduce the gender gap in the field of innovative entrepreneurship.
Startup Draft Law as a milestone
The Startup Draft Law is one of the milestones of the Recovery, Transformation and Resilience Plan, which will enable Spain to be aligned with the European standards of excellence in the ‘EU Startups Nations Standard’ 10 December 2021.
Create a company with a single euro of share capital
As mentioned above, the draft law stipulates that notary and registry fees will not be charged for the establishment of limited companies or for publication in the Official Companies Registry (BORME, Spanish acronym). Therefore, companies can be created using online resources. Furthermore, non-resident investors need not apply for a foreigner identification number (NIE in Spanish). Only a tax identification number (NIF in Spanish) shall be required for them and their representatives. It should also be noted that, when the ‘Crea y Crece’ Law, which is now in the parliamentary process, is passed, it will be possible to create a company with a single euro of share capital.
Who will be able to apply for Spain’s digital nomad visa?
People with a European passport can work remotely for up to 6 months without the need for official registration. Anyone from the EU or third countries that haven’t been a resident in Spain in the last five years can benefit from a special visa which can be renewed for up to five years
The scheme will be open to people who work remotely for non-Spanish companies. Anyone looking to apply for a digital nomad visa will only be able to get a maximum of 20% of their income from Spanish firms.
Applicants will need to be able to demonstrate that they have been working remotely for at least a year and have a contract of employment or, if freelancing, have been regularly employed by a company outside of Spain.
Anyone wanting to take advantage of the digital nomad scheme must prove they earn enough money to be self-sufficient. This is likely to be around €2,000 a month. And, furthermore, they will need an address inside of Spain.
The new visa will allow digital nomads to stay and work in the country for up to 12 months. Once their legal stay has ended, they will be able to extend it by 2 years. Later this can be extended up to another 5 years by applying for residence authorisation to be a remote worker in Spain.