The Council of Ministers approved on 10 December last the draft bill presented in July of this year to promote and increase the creation of startups. In this new law, many tax advantages will increase the attractiveness of new entrepreneurs in the Spanish market, boosting the country’s economy and its added value.
First of all, we have to put ourselves in a situation. A “Startup” (Emerging Company) is a small, recently created company formed by one or more entrepreneurs, containing a high innovative potential and a technological base, together with a business model of continuous exponential growth.
Its strong link with the world of the internet and new technologies represents a unique competitive advantage over other companies, as its name indicates, a implementation “startup” of young entrepreneurs who are willing to leave their comfort zone and enter with a new and much more innovative business model.
In the same way, it is widespread for these small startups to be sold before they find a stable business model and even disappear in a short time. Many companies have managed to progress and become rich, becoming great business models, such as the big companies Google, Facebook, and Amazon. There is no fixed time frame as to when a startup becomes a classic company as we know it, but if it were to happen, it would no longer be a “startup” business model.
Above all, it is necessary to know the most prominent startups in the last three years to understand their business model better. Some of them are, DudyFit born in 2020 (a platform that helps professionals to digitize their sports advice business), Hearts Radiant, born in 2020 (it is a startup determined to increase people’s life expectancy with good health), Rentchester born in 2019 (it allows users to choose the furniture that suits their circumstances only for the time they need with the option to extend, change, buy or return it whenever they want). They certainly meet specific requirements, such as technological and innovative nature and not having received more than €1m in investments.
ENISA (Empresa Nacional de Innovación Sociedad Anónima) is a public company that aims to support and promote innovative business projects. It seeks a benefit through the Public Administration, with the approval of credits and the promotion of activities related to venture capital, to favor the entry of solvency in those Spanish companies that can be considered innovative. Certification is required to be considered a “Startup” company, both from ENISA and the National Office of Entrepreneurs.
Five years ago, the Spanish Startup Association raised the need to provide the country with legislation to recognize the “particularity” of the startup as a business model.
The Startups Bill, or Startup Ecosystem Act, is approved with some heavily scrutinized changes in the initial draft. Notably, it indicated that an entrepreneur could only be understood as having never launched a startup before. Now it will be possible for the same entrepreneur to benefit from the advantages of this regulation in up to 3 different, equivalent or consecutive projects.
It includes significant investment facilities for newly created startups. In terms of taxation, the first €100,000 of investment will be tax-free to boost entrepreneurial initiative. Up to €100,000, 50% of the asset can remain tax-exempt. In addition, a reduction in corporate tax from 25% to 15% during the first four years of the company introduces the possibility of deferring payments of other taxes for two years.
The limit for tax-free “stock options” is increased from 12,500 to 50,000 euros exemption. This means that the company grants its employees the right to buy a certain number of shares at a specific price and for a certain period, making them part of the company’s capital.
Notably, the incorporation of startups will only take six hours in the case of online registration. Includes digital nomads, who will have their visas processed more quickly if they come to work in a Spanish startup and carry out their work independently.
Closer in Fuerteventura, thanks to the influx of technologists and digital coders, exchanging ideas and businesses with local entrepreneurs has given rise to a new era of conscious startups. Fuerteventura Startups is a think-tank based in Corralejo, which works with a team of diverse nationalities in travel and gastronomy startups, using technology to help local businesses and travel experiences. With a solid partnership with Erasmus Europe and Sun Dreams Global, they have attracted European talent who come to Fuerteventura to work as management trainees and help build these young companies.
We speak to one of the team members at Fuerteventura Startups, who says, “These are exciting times for the Canary Islands. We’ve been insisting to the local authorities for three years to integrate a solid system for tech startups to open here. With the 7% IGIC in our favor, we could be the new Silicon Valley of Europe. This is the time to build robust structures and simplified processes so entrepreneurs and tech companies already operating remotely can integrate and contribute to the local economy. There are already various examples of different institutions changing their tourism models. The Caribbean islands were the first to introduce a Nomad Pass that allows global travelers to live up to one year with unique benefits and contribute to the local economy. Last year, in one of our startups of vacation rentals, we booked more than fifteen thousand nights in a few weeks. Many of our guests have been remote workers who come to Fuerteventura with their teams, consume local experiences with great enthusiasm, organize culinary meet-ups, and contribute to the local economy and business when other countries have prohibitions and changing rules. “
“It’s time we think of the business it can generate for the local economy if the clear focus is given to this audience.”
“Spain is at the forefront in the promotion of an innovative entrepreneurship ecosystem to generate opportunities for young people” and is “among the most attractive countries for the creation of start-ups.”
Nadia Calviño, Vicepresidenta del Gobierno Español y Ministra de Economía
Sources from the Ministry of Economic Affairs have expressed their confidence that this ‘Startups Law’ will finally be approved by the summer of 2022. The deadline was the last quarter of 2022 when the European Union promised that these reforms would be made as part of the Recovery, Transformation, and Resilience Plan.