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Update 09.04.24: An announcement has been made by the leader of the Socialist Government in Spain, that his government plans to amend or repeal the “Golden Visa” legislation. Currently no timetable for these changes has been suggested and there is opposition to any revision. That said, this discourse, that started in May 2023, may result in some material changes. We will endeavour to keep you up to date with these as we are made aware of them and their precise impact.
For sometime I have been reporting on the progress of Spain’s so-called “Start-Up Law” (Ley de Startups), aimed at lessening bureaucracy for company set ups and welcoming those with some experience to work in the “digitech economy”. This law was finally passed by the Spanish Parliament on Thursday 3rd November 2022, and is intended to be operational by January 2023.
In part the beneficiaries of this legislation are those, particularly involved in the tech sector, who have the ability to structure their lives so a wealth of cherished possessions are less relevant. These wanderers so called “Digital Nomads” value their freedom of movement as a fundamental stimulant to enrich their “best lives”. Usually, hugely ambitious, they tend to see a conventional role in a career laddered hierarchy as being unattractive.
Please see here my previous pieces: New Spanish visa proposals aimed at attracting Digital Economy talent. How will you benefit from Spain’s “Startup Act”? And Are you ready to become a Costa del Sol Digital Nomad?
Over the next few weeks we anticipate receiving more clarifying and detailed information about the processes involved for entrepreneurs, including the new “slimmed-down” bureaucracy for establishing a new company, and would be “digital nomads”, but we set out here some of the now known factors that you will need to consider if this enterprise lifestyle appeals to you.
Which companies will the Spanish authorities regard as a “start-up”? It should be noted that your company may qualify, even if its up and running, as the impact of this legislation is intended to be retroactive where the criteria are met.
- Companies that are either newly launched or have a track record of less than five years (or seven in the biotech or energy sectors) will satisfy the test. They should not be formed by merger or be spun off from an existing company.
- They must be considered to innovative – a problem solver, disruptive or improving a given circumstance. A Spanish agency with acronym “ENISA” will be given the task to identify these “emerging” companies.
- The new company must be permanently based in Spain and 60% of the workforce must enjoy a Spanish employment contract.
- The company will cease to be regarded as a StartUp and with it the benefits will fall away if it is acquired by an established company with an annual turnover greater than €10m, if it is regarded as environmentally harmful or if a shareholder, with 5% or more of its equity, is convicted of a serious criminal offence.
- During the period of benefit under the new regime the company will not be able to distribute dividends to its shareholders.
A major incentive for backers of companies to be launched in Spain under this new regime is that for a maximum period of four years their exposure to Corporation Tax on their profits will be reduced from the current 25% to 15%. In addition, another valuable incentive is that both companies and digital nomad may request that their respective Corporation Tax and Income Tax (IRNR) may be deferred, interest free, for 12 months and 6 months respectively.
When establishing a new business the Spanish government has recognized the need to invest to grow. For this reason they have increased the annual deductible base for investing in a start-up from the currently allowable €60,000 to €100,000 and the rate of deduction from 30% to 60%.
Part of the intention of this legislation is to reduce the “red-tape” for would be entrepreneurs and investors. To this end the legislation has eliminated the need for all investors to require a foreigner’s identifying number (NIE) to create a business with the only obligation being that they will need a Spanish tax identification number (NIF).
Who will qualify as a “Digital Nomad”? They are defined by the law as being those persons whose jobs permits them to work remotely and to regularly change residence.
More specifically it appears that the following are the key criteria:
- Non European Economic Area (EEA) national
- Demonstrably a Digital Nomad being a remote worker of a company based outside Spain or a foreign worker of a foreign company located in Spain.
- This will require proof of employment with a foreign company of not less than one year.
- Proof of more than three years work experience.
- Proof of qualifications – Batchelor’s Degree, a Post-Graduate Masters qualification or a recognized Business School qualification.
- To satisfy the criteria, not more than 20% of total revenue of the company worked for must be generated in Spain.
The ‘start-up law’ establishes a the Digital Nomad visa for international teleworking for non-EU citizens. It will allow entry and residence in Spain for an initial period of one year. Following the expiry of initial year, the Visa may be extended for a further two years of residence as a remote worker. In turn this may be further extended for a further two years giving a maximum total duration of five years.
Currently, we are awaiting clarification as to whether the Digital Nomad will be obliged to make social security contributions in Spain and qualify for Spanish public health cover or if it will be necessary to seek private health insurance as a condition of the visa, similar to that for the Non-Lucrative and Golden Visas.
Why will it be Tax Attractive to be a Digital Nomad? Usually someone who is resident in Spain for more than 183 days becomes a Tax Resident. However, Digital Nomads who receive their income in Spain and stay for more than 183 days will be entitled to pay non-resident income tax (IRNR) on their earnings, rather than regular income tax (IRPF). IRNR is usually 25% but this legislation reduces it to 15% for Digital Nomads.
When this legislation was first proposed it was assessed that relaxing the the rules regarding wealth creation by such companies and with the incentive of bringing Digital Nomads to work remotely from Spain would add value in the region of €45 billion to the Spanish economy.
With these developments we are set to enter a fascinating period of enterprise and growth. I can already see in the local infrastructure of the Malaga region, with its commitment to the new economies, a desire to grow and flourish. A exciting, positive and forward looking time for all.
Should you be interested in discussing the legal process involved in buying a property in the Marbella region, we would be delighted to assist you. Our multi-disciplinary team of bi-lingual, highly experienced and wholly independent Abogados and Asesores Fiscales are ready to help you.
Please call me, Mark FR Wilkins, during usual business hours on +34 600 343 917 or, if you prefer, or e-mail me at mark@roslegal.es
Please note that our posts are for general interest. There is no substitute for proper legal advice tailored to your specific circumstances as provided by a qualified Abogado who is experienced in the application of the Spanish Law.
Nothing contained in this article should be seen or taken as the writer or the publisher providing legal, tax or financial advice.
All details have been reasonably fact-checked and all efforts have been taken to ensure that facts are accurate as at the date of publication.
© Mark FR Wilkins 2022. All rights reserved.