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WORKING IN SPAIN

New details: Spain’s rules and benefits for foreign startups

Spain recently approved its new Startups Law, with one of the aims being to get overseas investors and new companies to set up shop in the country. Here is the latest information on the requirements and benefits for these foreign startups.

New details: Spain's rules and benefits for foreign startups
Spain's new Startups Law. Photo: Austin Distel / Unsplash

Spain’s new Startups Law is open to anyone from the EU or third countries, as long as they haven’t been resident in Spain in the five previous years. It will allow non-EU applicants to gain access to a special visa for up to five years. 

The law came into force in early 2023 and gives both startups and digital nomads several benefits.

For the purposes of this article, we will focus specifically on the rules and requirements for startup companies.

For those wanting to find out more about Spain’s digital nomad visa, click here

If you’re thinking about moving to Spain to create a startup company, there are several rules and requirements you should keep in mind to see if you’re eligible. 

Firstly, your company must be legally registered in Spain. This means having a registered office or headquarters established in Spain.

But what exactly does Spain define as a startup? Basically, if you want to apply for a residency visa through the Startups Law, then your company must have been created or registered within the previous five years. If your company is older than this, it is no longer considered a startup and you will not be eligible for this type of visa or the associated benefits. The period is extended to seven years for those startups in the industrial, biotechnology or energy industries.

If you are employing other workers, you must make sure that at least sixty percent of your workforce has an employment contract within Spain. It means that you can hire remote workers in other countries, but the majority of them need to be in Spain, creating more jobs on Spanish soil.

Your startup company must not be the result of a merger or a subsidiary or transformation of another company. This means that your company has been newly created or established and that it hasn’t existed previously in a different form.  

The company must not be listed on the regulated stock market and it must not distribute dividends either. 

What are the tax benefits?

Besides being able to get residency in Spain, the Startups Law allows companies to benefit from several tax breaks.

Startups will be able to pay non-resident tax rates or IRNR, rather than the regular tax rates for residents. The IRNR tax rate is generally 25 percent, but for startups that meet the above requirements, the rate will be reduced to 15 percent in the first tax period in which the company makes a profit, as well as the following three tax periods or the first four years.

This will be dependent on them continuing to meet all the rules.

READ ALSO: Your questions answered about Spain’s digital nomad visa

The new law also aims to eliminate the obligation for international investors to request an NIE (foreigner ID number) to carry out their business. Both investors and their representatives will only need to obtain Spain’s tax identification numbers (NIFs).

Startups will no longer be eligible for reduced tax rates if:

  • The startup earns a net profit of over €10 million.
  • It is acquired or bought out by another company that doesn’t meet the rules.
  • It is no longer considered a startup because its older than five years or seven years in the case of industrial, biotechnology or energy industries.
  • The company ceases to exist.
  • The company causes environmental damage which goes against the EU Regulation 2020/852 of the European Parliament and of the Council of June 18th, 2020.
  • Anyone who has at least a five percent stake in the company or that amount in shares is convicted of a criminal offence laid out in the Start-Up Law.

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TAXES

How to apply for Spain’s Beckham Law tax regime

Spain’s Beckham Law is a tax regime that enables foreigners who move here to pay much lower taxes than normal. Here's our step-by-step guide on how to apply for it through Form 149.

How to apply for Spain's Beckham Law tax regime

The law was nicknamed after footballer David Beckham when he signed for Real Madrid as he was the first one to take advantage of it, however, the law’s official name is Régimen Especial de trabajadores desplazados o impatriados.

These ‘displaced workers’ or ‘inpatriates’ are generally foreign employees who are brought to work in their company’s subsidiary in Spain. 

If you qualify for the Beckham Law, it means that you can pay tax in Spain as if you were a non-resident for a total of six years, even though you live here.

Essentially, you will pay a flat fee of 24 percent up to €600,000.

READ ALSO – Beckham Law: What foreigners need to know about Spain’s special tax regime

How to apply for Beckham’s Law

If you qualify for Beckham’s Law, it will not automatically be applied to you, you will need to apply for it. In order to do this, you need to complete Modelo or Form 149.

It’s essential that you do this within the first six months of living in Spain, if you miss this window, then you will be unable to benefit from the tax regime.

You can complete this form if:

  • You have not been resident in Spain during the five previous years.
  • You moved to Spain to take up work and have an employment contract with an employer in Spain or work remotely for a company outside Spain.
  • You are not self-employed, unless it’s an entrepreneurial activity that is of an innovative nature and is of particular financial interest for Spain. For this, you must have a favourable report issued by the General State Administration.

To complete Modelo 149 you need to fill it out and submit it online. For this, you will need a digital certificate or a Cl@ve pin in order to identify yourself first. 

Section 1

In the first section of the form, you will need to complete the boxes with your personal details such as NIE/NIF, name and phone number.

Section 2 is reserved for the details of any professional who is filling out the form for you, but if you’re doing it yourself, you can ignore this.

Complete your personal details in section 1. Source: Agencia Tributaria
 

Section 3

On this part, you must state your reasons for applying for Beckham’s law.

You must choose one of two answers: Either ‘desplazamiento como consecuencia de un contrato de trabajo’, which is for those who have had to move to Spain because they have been transferred here through their work, or ‘desplazamiento como consecuencia de la adquisición de la condición de administrador de una entidad’. This means that you have had to move to Spain because your company has been acquired by another, which forces you to move here.  

Under these sections, you must complete the details that correspond to you and your situation, such as your NIF, the date you entered Spain, when you started paying social security and which country you moved from.  

Fill out your reason for applying for Beckham Law. Source: Agencia Tributaria
 

Sections 4 and 5

If you are applying for Beckham’s Law, you will leave sections 4 and 5 blank. Section 4 is if you want to renounce your special tax regime and section 5 is if you no longer meet the conditions of the law and are forced to give it up. This could be if you’ve changed jobs for example. 

Section 6

The last section is for those who have completed their contract in Spain and are moving back to their home country, so again, you can leave this blank.

Leave the last sections blank if you’re applying for the first time. Source: Agencia Tributaria

Submitting your form

When you are done, click on ‘Validar declaración‘ or ‘Validate declaration’ to check if there are errors. The list of errors and warnings detected will be displayed, allowing you to correct it by clicking on the ‘Go to error’ button next to the description.  

If no errors are detected, you can file the return. You will do this by clicking on ‘Firmar y Enviar‘ or ‘Sign and Send’.

If everything is correct, you will get the response sheet that says ‘Su presentación ha sido realizada con éxito’ or ‘Your submission has been successfully completed’ with a PDF to download a copy of the form.  

Additional documents

Along with your form, you will have to attach a copy of your employment contract with a Spanish company, your Social Security number, a copy of your passport and your foreign identification document such as TIE or EU green residency card.  

Receiving a response

The law states that you should receive a reply to see if you’ve been successful or not within a period of 10 working days, however, in reality, it can take more like one or two months to receive an answer.

Once Beckham’s law has been applied to you, if you keep meeting the requirements, you can benefit from it for up to six years. Each year you must declare your taxes using Modelo or Form 151.

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