On 10th December 2021, the Spanish Council of Ministers agreed to refer the Bill for the Promotion of the Ecosystem of Emerging companies (better known as “Startups“), to the Spanish Parliament as one of the milestones of the Recovery, Transformation and Resilience Plan, which responds to the criteria established in the EU Startups Nation Standard declaration or set of practices designed to promote entrepreneurship in the European Union.
The first titles configure its essential civil and commercial framework.
Title I regulates, among the general provisions:
1.- The concept of “Emerging Company” (Article 3), as any individual or legal entity that meets the following requirements:
a) It is newly created or has not been incorporated for more than five years, or seven years in the case of biotechnology, energy and industrial companies.
b) It was not created as a result of a merger, a split-off or a transformation operation.
c) It has its registered office or permanent establishment in Spain.
d) At least 60% of its workforce has a contract in Spain.
e) It is an innovative company (its purpose is to solve a problem or improve an existing situation by developing products or services or processes that are new or substantially improved compared to the state of the art and involve a risk of technological or industrial failure).
f) Not distributing or having distributed dividends.
g) It is not listed on a regulated market or in a multilateral trading system.
h) In case of belonging to a group of companies according to Article 42 of the Spanish Commercial Code, the whole group must comply with all the above requirements.
2.- The need to prove the innovative nature (Article 4) by means of a declaration to be made by the Innovation National Enterprise (ENISA – Empresa Nacional de Innovación S.A.), which must be renewed annually.
3.- The conditions to benefit from the regime established by this Law (Article 5). The company and its investors will not be able to benefits provided for therein when:
a) They cease to meet the requirements set forth in Article 3 and five or seven years have elapsed since the incorporation of the emerging company.
b) The termination of the company before this term.
c) It is acquired by another company that does not have the status of an emerging company.
d) The annual turnover exceeds 5 million euros.
f) It develops an activity that generates significant damage to the environment according to EU Regulation 2020/852 on the establishment of a framework to facilitate sustainable investments.
g) The promoters or administrators have been convicted by a court ruling for any type of crime.
4.- Registration in the Commercial Registry (Article 6). The emerging companies will be registered in the Commercial Registry and such condition will be recorded. The registrar will verify the concurrence of the requirements established in Articles 3 and 5. The status of emerging company registered in the Commercial Registry will be a necessary and sufficient condition to benefit from the provisions foreseen in this Law. The Commercial Registry will enable a free online consultation procedure that will include, at least, the year of incorporation of the company and its status as an emerging company.
Title II establishes tax incentives, namely:
- The tax rate for corporate income tax (Impuesto de Sociedades) and non-resident income tax (Impuesto sobre la Renta de los No Residentes) is reduced from 25% to 15% in the first four years after the taxable income becomes positive.
- The amount of the tax exemption for stock options is increased from 12,000 to 50,000 euros per year, in the case of delivery of shares or membership interests derived from the exercise of stock options. The conditions for the generation of treasury stock in limited liability companies are made more flexible.
- The maximum deduction base for investment in newly created companies is increased (from 60,000 to 100,000 euros per year), as well as the deduction rate and the period of recent creation (which increases from 3 to 5 years in general or to 7 years for certain companies).
- Deferral of the corporate income tax or non-resident income tax debt is allowed in the first two years after the taxable income is positive, without guarantees or interest for late payment.
- The obligation to make instalment payments of corporate income tax and non-resident income tax in the two years following the year in which the taxable income is positive is eliminated.
It is foreseeable that changes will be made to the Bill during the parliamentary process. The aim is to conclude this process before the summer of 2022 so that the Law can enter into force by 30th September 2022 at the latest.
Mireia Bosch
Vilá Abogados
For further information, please contact:
31st December 2021
