Law 28/2022, of December 21, on the promotion of the startup ecosystem, commonly referred to as the “Startup Law“, came into force on 23 December 2022.

Its main objective is to support and boost the creation and growth of startups and innovative entrepreneurship, and all that this entails.

So what is understood by an emerging company?

The Law includes a definition for a start-up company, in order to establish the applicable scope of this regulatory framework, understanding a start-up company to be any legal entity that simultaneously meets the following conditions:

    • It must be newly created or not more than 5 years old, in general, or 7 years old in the case of the biotechnology, energy, industrial and other strategic sectors, or companies that have developed their own technology, designed entirely in Spain.
    • It must not have resulted from a merger, spin-off or transformation of companies that are not considered emerging companies.
    • It must not distribute or have distributed dividends.
    • It must not be listed on a regulated market.
    • It must have its head office, registered office or permanent establishment in Spain.
    • 60% of the workforce must have an employment contract in Spain.
    • It must develop an innovative entrepreneurial project with a scalable business model.

The main tax incentives from which emerging companies will be able to benefit are as follows:

    • As regards Corporate Income Tax and Non-Resident Income Tax, they will be taxed in the first tax period in which, while maintaining the status of start-up company, their taxable income is positive, and in the following three periods, provided that they maintain the aforementioned status, at the rate of 15%.
    • As regards Personal Income Tax, the amount of the deduction for subscription of shares or participations in new or recently created companies is increased from 30% to 50% of the amounts invested. The maximum deduction base is increased from 60,000 to 100,000 euros. This modification affects any investment in new or recently created companies, regardless of whether they are considered start-ups or not.

In the area of Social Security, a 100% rebate on the contribution corresponding to the minimum base established in general from time to time, is introduced in favour of self-employed workers of emerging companies who engage in multiple activities and who meet the following requirements:

    • They must be workers who are included in the Special Regime for Self-Employed Workers because they have effective control, directly or indirectly, over an emerging company.
    • They must simultaneously be working for another employer.

This rebate will be enjoyed continuously as long as the situation of multiple activities persists and, at most, during the first three years, calculated from the date of their registration as a consequence of beginning self-employed activity, due to the time spent working at the emerging company.