The repercussions of the draft bill for the facilitation of the ecosystem of emerging enterprises.
Within the context of a globalised and interdependent economy, and with the aim of making the country more competitive within the startup ecosystem, Spain has published a Draft Bill for the facilitation of the ecosystem of emerging enterprises, commonly referred to as the “Startup Bill“. Although this is subject to possible amendments during the various phases prior to being passed by parliament, it includes far-reaching changes with regard to matters of taxation and migration which would be of significance for the international mobility of workers.
The main aim of the legislative proposal is to create a favourable climate for Startups, which are for the purposes of this Draft Bill taken to be those enterprises the activity of which requires the generation or extensive use of scientific/technical knowledge and technologies, fulfilling a series of requirements set out in the draft bill itself.
Talent attraction and digital nomads
In this regard, one of the key purposes of the legislative text, and one of the features of greatest interest from the perspective of Global Mobility, comprises the measures brought in to attract international human capital and talent to develop the Spanish startup ecosystem, since this could apply to other sectors as well.
The explanatory memorandum of the Draft Bill mentions the capacity of the startup sector for remote working, provided that one has IT equipment and a reliable Internet connection. Meanwhile, the expansion of working from home has given rise to the emergence of a new lifestyle, known as digital nomadism, led by those whose jobs allow them to work away from the office and regularly move home, combining highly qualified work with immersive tourism in the country in question.
In order to help attract such digital nomads and homeworkers, the draft bill includes two far-reaching developments:
A. The first is implemented by the third final provision of the bill, amending Act 14/2013, of 27 September 2013, for the support of entrepreneurs and their internationalisation, through the creation of a new category of visa and residence permit: VISA AND RESIDENCE PERMIT FOR INTERNATIONAL HOMEWORKERS.
- The visa allows applicants to enter and live in Spain for a maximum of one year, provided that they are self-employed or work remotely for foreign companies.
- The residence permit for international remote working serves to extend the effects of the initial visa referred to above for a maximum period of 2 years.
B. The draft bill also includes a second final provision amending Article 93 of the Personal Income Tax Act, among other measures, with regard to the Taxation Regime applicable to foreign workers based within Spanish territory. The following points should be highlighted from the new text set out in the draft bill:
- While the current regime requires individuals not to have been resident for tax purposes in Spain for the last 10 years to benefit from this regime, if the legislative text currently under approval is passed, the time limit for application of the regime would be cut in half, in other words to 5 years, making it easier to apply.
- Unlike the current regime, which allows the special regime to be applied during the year when the change of residence occurs and the next 5 years, the current text of the draft bill extends application of the special regime to the year of the change of residence and the following 10 taxation periods.
- Lastly, unlike the current regime, it establishes the possibility of extending the special regime to relatives, in other words the person’s spouse and children aged under 25, or children with a disability whatever their age, or in the absence of marital ties, the children’s parent, provided that a series of conditions are fulfilled.
This second final provision amends other aspects of the Income Tax Act:
- Article 42.3(f) regarding the exemption on the distribution to workers of shares or stock in the company itself or other companies belonging to the same group.
- Article 68.1, regarding the deduction at new or recently founded companies for the purposes of increasing the percentage deduction from 30% to 40%, while the maximum base sum would rise from 60,000 to 100,000 euros.
Unfortunately, the draft bill lacks a clear transitional regime for the purpose of the amendments made to the Income Tax Act. In this regard, it fails to resolve the reasonable doubt as to whether the new text proposed for Article 93 of the Income Tax Act will apply to taxpayers who are already applying the special regime at the date when the proposed amendment to the rules takes effect.
Given all the aspects cited briefly above, this legislation, which is nonetheless still only at the draft bill stage, could clearly have a huge impact on the future of international talent management and digital nomads, and we will therefore be following any upcoming developments very closely.
José Daniel López
Senior Associate in the International Taxation Area
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