Spain’s Startup Law, what does it consist of?
The Startups Act seeks to create a favourable environment for the creation and growth of this business model by providing a specific regulatory framework that addresses the particular needs of these emerging companies.
In this ECIJA Advisory blog, we will see how with this law, the Spanish government takes an important step to position the country as a benchmark in the global entrepreneurial ecosystem. It adapts to the demands of an increasingly competitive and technological market.
Objectives of Law 28/2022
Law 28/2022, popularly known as the Startups Law and enacted on 21 December 2022, was created with the fundamental objective of fostering the startup ecosystem in Spain. To this end, it establishes a series of measures designed to facilitate the creation, growth, and consolidation of innovative startups.
In this sense, the law focuses on three key areas: taxation, commercial and labour, providing a set of incentives that seek to make entrepreneurship more attractive in the country.
One of the most significant aspects is the simplification of administrative procedures, allowing entrepreneurs to focus on developing their businesses without being overwhelmed by bureaucracy. In addition, the law facilitates access to finance, both through public funds and private investors, recognizing the importance of capital in the early stages of start-ups.
Key benefits of the Act for Startups
Law 28/2022 introduces a number of significant benefits aimed at supporting startups in their development and consolidation. Below, we highlight the two most relevant ones.
Tax and commercial advantages
One of the pillars of the law is the introduction of tax incentives for startups and their investors. This includes the reduction of the tax rate for start-ups during their first years of activity, allowing them to reinvest more resources in their growth.
In addition, the law facilitates the offsetting of tax losses and improves the treatment of stock options, a key element in attracting and retaining talent in these companies.
Facilities in the field of employment
On the employment side, the law establishes measures that make the hiring of talent more flexible, allowing start-ups to adapt quickly to their changing needs.
Incentives have also been implemented for the recruitment of highly qualified profiles, which is crucial for companies that base their growth on innovation and technological development.
Impact on the Spanish entrepreneurial ecosystem
By providing a specific legal framework, this legislation has created a more favorable environment for the creation and development of innovative enterprises. According to recent studies, the number of startups in Spain has grown substantially since the law was passed, reflecting the effectiveness of the measures adopted.
In addition, the law has improved the competitiveness of Spanish startups internationally. With a more favorable tax system and greater ease in attracting talent and funding, startups in Spain are better positioned to compete in global markets.
This is particularly relevant in sectors such as technology, biotechnology and renewable energy, where innovation is key to success.
What types of companies can benefit from the Startups Act?
The law is aimed at innovative startups that develop new products, services, or processes and have a high capacity for expansion.
To benefit from the law, companies must meet certain criteria, such as being newly created or having been in existence for less than five years (seven in some specific sectors), and not having distributed dividends.
How can I apply for classification as a startup under Law 28/2022?
Companies wishing to benefit from the Startup Law must apply for classification as a startup through the competent body, which in many cases will be ENISA.
The application requires the company to meet certain requirements, such as being cutting-edge and having a high growth potential, among others.
Challenges and future considerations
Despite the progress made with the Startup Law, there are still challenges that need to be addressed to maximize its effectiveness.
One of the main challenges is to ensure that startups in all regions of Spain, not only those located in large cities, can benefit from these measures. In addition, the law must constantly adapt to changes in the technological and business environment to remain valuable.
Another challenge is to ensure that tax benefits and administrative facilities effectively reach all start-ups, regardless of their size or sector. To this end, effective implementation of the law and constant monitoring by the authorities are essential.
Create your Startup in Spain under Law 28/2022
The Startups Law is a step towards the consolidation of Spain as a hub for innovation and entrepreneurship in Europe.
However, for this legislation to reach its full potential, it will be necessary to continue to adapt it to the needs of the market and to ensure that all entrepreneurs can benefit from its advantages.
At ECIJA Advisory, we are up-to-date with all the relevant regulations to enable you to create your Startup in Spain. With a continued focus on innovation, access to talent and global competitiveness, Law 28/2022, with its benefits and challenges, will be a key element for you to carry out this process.
Frequently Asked Questions on Startup Law
What is the Startup Law in Spain?
The Startups Law, officially known as Law 28/2022, of 21 December, on the promotion of the startup ecosystem, is a piece of legislation that establishes a specific regulatory framework to facilitate the creation and growth of innovative startups in Spain. Its main objective is to boost entrepreneurship, innovation, and the country’s competitiveness in the global arena.
How does the Startups Act make it easier to recruit talent?
The law introduces measures that make hiring more flexible, allowing startups to adapt quickly to their needs. In addition, incentives have been created for the recruitment of highly qualified professionals, which is crucial for companies that rely on innovation and technological development.
What measures does the law include to facilitate startup financing?
The Startup Law facilitates access to funding through various mechanisms, including the possibility of accessing public funds, tax incentives for investors and simplified procedures for raising capital. These measures are designed to help startups obtain the necessary resources in their early stages of development.
How does the Startups Act affect stock options in startups?
The Startup Law improves the tax treatment of stock options, which are a key tool for attracting and retaining talent in startups. Under this law, stock options have a more favourable tax treatment, allowing startups to offer them as part of their employee compensation with greater tax benefits.
What role does the Startup Law play in the internationalization of Spanish startups?
The law facilitates the internationalization of startups by improving their global competitiveness through tax incentives, access to finance and simplification of procedures. These measures enable Spanish startups to compete more effectively in international markets and expand their global reach.
