The plenary session of the Spanish Lower House of Parliament has approved the Law to Promote an Emerging Companies Ecosystem, better known as the Startup Act. The regulation, the first in Europe with these characteristics, places Spain at the vanguard in the development of an entrepreneurial ecosystem based on innovation, creation, the relocation of emerging companies, attracting talent and international capital.

The Startup Act is part of the series of reforms aimed at improving the country’s business climate, together with the Create and Grow Act and the Bankruptcy Act passed this year. It is also one of the important milestones for this term in office within the 2026 Digital Spain Agenda, the ambitious digitalisation plan the country is deploying.

Main areas to promote the entrepreneur network

With the Startup Act, the government is seeking to stimulate investment and attract talent, as well as facilitating collaboration between SMEs, large companies and emerging companies and promoting the cooperation between emerging companies and entrepreneurs with universities and research centres.

The law defines the category of a startup company as one that is less than five years old (or seven years old for strategic sectors); one that is not listed on the stock market and does not pay dividends; whose headquarters or registered office is permanently established in Spain; with 60% of the workforce employed in Spain; and whose maximum turnover is 10 million euros.

It must also be “innovative” in nature, understood as developing new or improved products or services. Seven  criteria have as a result been incorporated into the law, to be evaluated by ENISA (Spanish Public Innovation Company), and including the “degree of innovation”, “degree of market attractiveness”, the “stage of life of the company”, the “business-scalability model”, “competition” and “volume of customers”.

The basic aim of the law is to promote a more flexible and speedy administrative system, providing for a single online window to certify innovative startups as Spanish startups (ONE) and to ensure that notary and registry fees are kept to a minimum.

Attracting international talent
An important new aspect for foreigners has also been included, whereby it is no longer compulsory for non-resident investors to obtain the foreigner identification number (NIE), they and their representatives only being required now to have a tax identification number (NIF).

Furthermore, the law includes means to make it easier to obtain a visa and resident status for the startups’ highly qualified employees, as well as for non-resident Spanish workers, for at least five years.

The text also contains important tax measures such as reduced rates for corporate income tax and personal income tax for non-residents, down from the basic rate of 25% to 15% in the first four quarters after positive taxable income is generated. In addition, the amount of the tax exemption on alternatives to stock options has been raised from 12,000 euros to 50,000 euros annually in the case  startups providing shares and equity interests derived from exercising stock options.

The law also increases the maximum tax deduction  for investment in new or recently created companies (from 60,000 euros to 100,000 euros annually), the deduction rate (from 30% to 50%) and the period for which the company is considered recently created (from three years to five years, or seven years for companies in certain sectors).

At the vanguard in Europe
The Startup Act is the first in Europe to specifically aim at creating an innovative entrepreneurial ecosystem.

Spain has demonstrated its capacity to offer proposals and a desire for cohesion in promoting entrepreneurship excellence in Europe as one of the founding members of ESNA (European Startup Nation Alliance), alongside Austria and Portugal This alliance seeks to generate a coordinated digital entrepreneurship ecosystem to double the number of technology unicorns in the EU by 2030, a large-scale challenge wherein Spain is consolidating its leadership thanks to initiatives like the recently approved law.

Spain leads the ranking in terms of fear of failure as a setback when starting a business, with 64% of the population compared with the world average of 47%. (GEM Report 20-21). And yet it has established an entrepreneurship ecosystem that is ranked in the world top 20, above the European average (GEM 20-21). The Startup Act is a vector of change to reverse this trend and finally make Spain a hub of digital talent in the EU.

Following its final approval in the Lower House of Parliament, the Startup Act is scheduled to come into effect in early 2023.

_{Source: La Moncloa
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