Startups, one step closer to their own law

Good news, Fellowers, and startups! Last Tuesday, the Council of Ministers approved the Startups law draft bill. The text was awaited not only by startups but also by investors and our Fellow Funders.

Dreams come true

Although this law still has to go through several stages, such as a public consultation to the community and the Congreso de los Diputados for possible improvements and its subsequent approval, it is already a reality and reflected in an official document. The Spanish Prime Minister, Pedro Sánchez, announced the implementation of a Startups law during one of the benchmark events in the entrepreneurial ecosystem, the 2018 South Summit. Almost three years later, this long-awaited law is one step away from entering into force.

What advantages does this new regulation bring for startups? One of the main benefits will be reducing corporate income tax, reducing from 25% to 15% for a maximum of four years. This draft bill also provides for a reduction in non-resident income tax for startup teleworkers. Likewise, startups will qualify to defer tax debts on the two previously mentioned taxes for two years.

Another crucial advantage considered is the stock options, i.e., the right given to the employees and managers of a company to buy shares of the company at a price below the market price. Thanks to this salary supplement, employees can participate in the company’s capital and contribute to the company’s expansion. These regulations also provide a series of exemptions that will encourage such a positive practice for startups, which need to retain their talent and share their success with the entire team.

What about investors?

As mentioned before, companies will not be the only ones to benefit from the Startup law. Fellow Funders aims to support both entrepreneurs and investors. We are glad to see that investors also have reasons to celebrate

“Deductible or not deductible, that’ s the question.” The benefits of investing in startups go far beyond possible deductions, yet we cannot deny it is a significant element to consider when selecting investments in our platform. The Spanish Government is also aware of the importance of deductions to incentivize investment. For this reason, the Startup law provides an increase in deductions (from 30% to 40% ) and the maximum deductible base (from €60,000 to €100,000).

There is also a relevant novelty for foreign investors. The Spanish Government is aware of the significance of international capital inflows and decided to facilitate the entry of foreign investors by reducing bureaucratic obstacles. Once the law is approved, foreign investors will be able to use their own Identification Number (for example, their passport) without needing to obtain the famous NIE.

Who will be the ones benefiting?

The Startup law brings very positive news for the startup ecosystem. We have already said that this law will benefit startups, but which are these companies? There are three requirements to benefit from this law:

1. The company must have been operating for less than five years.

2. Its turnover must be less than five million euros.

3. Its headquarters must be in Spain, employing at least 60% of its employees in Spain.

These requirements are perhaps the most controversial point of the law, as several players in the ecosystem claimed this startup definition to be excessively short, thus excluding many innovative companies from its benefits. Another discussion revolves around the reduction of the Corporate Income Tax. Despite its purpose of helping startups, the application of this measure will be null in many cases. During their first years, startups tend to book losses, and therefore the Corporate Income Tax does not apply to them.

Although the Startup law still has room for improvement, it is a first step in creating a favorable ecosystem for entrepreneurship and investment in our country. As a financial company dedicated to helping startups grow, Fellow Funders welcomes the approval of this bill.

The European Union, a leading player in the process

Times are changing for the startup ecosystem and alternative financing. So the legal could not be less. The ultimate aim of laws is to comply with the social and economic requirements that justify them. This November, a new regulation (EU)2020/503 will come into force that unifies the requirements and criteria for crowdfunding platforms and services throughout the EU, great news for companies. It will allow an increase in the cross-border provision of crowdfunding services (with the same criteria throughout the European Union), fostering their growth and diversification.

Likewise, the European Union (EU) understands the need to change to face the new post-pandemic paradigm. However, not only at the legal level. This year, the so-called NextGenerationEU European recovery funds come into action, providing, among other things, support for startups and companies, as well as promoting digitization.

Fellow Funders is already working to comply with all legal requirements and, above all, to offer entrepreneurs and investors our services with our characteristic professionalism and guarantee.

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