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Spain Approves Law to Support Innovative Startups — Orbitax Tax News & Alerts

On 1 December 2022, the Spanish Congress of Deputies definitively approved the Law for the promotion of the ecosystem of emerging companies (the "Startup Law"). The law provides the following beneficial measures for innovative startups:

  • The tax rate for corporate tax and non-resident income tax is reduced from the general rate of 25% to 15% for the first four fiscal years after taxable income is first recorded;
  • Corporate tax and non-resident income tax payments for the first two years in which taxable income is recorded may be deferred, without requiring any deposits or late payment interest, for a period of 12 and 6 months, respectively;
  • The obligation to make installment payments on corporate tax and non-resident income tax is eliminated for the first 2 years after taxable income is first recorded;
  • The tax exemption on stock options is raised from EUR 12,000 to EUR 50,000 per year for startups that distribute shares or share units deriving from the exercise of call options, along with relaxed conditions;
  • The maximum deductible amount for individuals investing in qualifying new or recently created companies is raised (from EUR 60,000 to EUR 100,000 per year), as is the deduction rate (from 30% to 50%); and
  • The period for considering a company 'recently created' is extended from 3 to 5 years in general, or to 7 years for companies in certain sectors, including biotechnology, energy, and industrial companies and other strategic sectors.

The law also includes other related measures, including measures for a one-stop window, the Empresa Nacional de Innovación SME (SME National Innovation Company, or ENISA), which will evaluate whether companies are innovative and eligible for the beneficial tax measures, as well as relaxed requirements for the special regime of inbound expatriates and a 50% "carried interest" reduction for qualifying private-equity fund managers.

The law must be published in the Official Gazette and will enter into force on 1 January 2023. Further details will be published once available.