B Law & Tax
19 May 2023

Tax advisor: Tax innovations in the Startup Law

In recent times, we are familiar with the fact that tax and legislative updates usually imply an increase in the tax burden. However, the recent Law 28/2022, Startup Ecosystem Encouragement Law, also known as Startups Law, has introduced some welcome tax innovations.

A startup is considered as such when it meets a series of criteria established in Article 3.1.a of the Law, which include being recently created or being less than 5 years old since its registration in the commercial registry, with an exception that extends this limit to 7 years. In addition, the company must develop an innovative entrepreneurship project with a scalable business model, which will be evaluated and qualified by ENISA, a public entity.

Tax innovations for startups

Firstly, a reduction has been established in the corporate income tax and non-resident income tax rate (for those who obtain income through an establishment in Spanish territory) from the general rate of 25% to 15% during the first four years since the taxable income is positive and provided that the company meets the condition of being considered a startup and maintains it.

It has also been established the possibility of deferring the payment of the corporate income tax debt during the first two years in which the taxable income is positive. This deferral is made without the need to present guarantees or pay late payment interest. The deferral period is 12 months for the first year and 6 months for the second year, counted from the end of the period for payment in the voluntary period of the tax debt corresponding to those tax periods. In relation to this, the obligation to make installment payments has been eliminated for companies considered as emerging during the two years following the year in which the taxable income is positive.

The delivery of shares or participations granted to employees of an emerging company is exempt from taxation in the part that does not exceed 50,000 euros per year. This offer must be in line with the company’s general remuneration policy and encourage employee participation in it.

In addition, a special rule has been established to value shares or participations granted to employees of emerging companies. The value of the shares or participations subscribed by an independent third party in the last capital increase carried out in the year prior to the delivery of the shares or participations will be considered. In the absence of such capital increase, they will be valued at their market value at the time of delivery to the employee.

In the event that the work income in kind derived from the delivery of shares or participations of an emerging company exceeds 50,000 euros, they will be imputed in the tax period in which any of the following circumstances occurs: the admission to trading of the company’s capital in a stock exchange or in any multilateral trading system, whether domestic or foreign; or the exit of the corresponding share or participation from the taxpayer’s assets.

Finally, the deduction for investment in new companies has been improved by increasing to 50% the deduction applied to the capital invested. In addition, the deduction base has been increased to 100,000 euros.

B Law & Tax International Tax & Legal Advisors.

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