Autonomous tax advantages for investors: 2023 Tax Return

As an investor, considering the autonomous community tax advantages associated with start-up investments applicable to your income tax return in Spain will help you to define a diversified portfolio. Such deductions can complement the state-level tax advantages depending on the autonomous community, which we already mentioned in the article “Autonomous tax advantages for investors: 2023 Tax Return”.

The funding system for the mutual regime autonomous communities is regulated by Law 22/2009. The scope of the regulatory powers of these communities in the Personal Income Tax is established in Article 46 of the aforementioned law. According to the website of the Spanish Tax Agency, the Autonomous Communities may assume, among other regulatory powers, the approval of deductions applicable to the total tax liability of the Autonomous Communities. These deductions include the application of income tax.

Some autonomous communities have their own tax incentives, implementing the provisions established for this purpose in the state personal income tax regulations. The Principality of Asturias, Castilla-La Mancha, the Canary Islands, La Rioja, and the Valencian Community have no such tax deductions.

Taxpayers must have their habitual residence in the respective territories where they wish to enjoy these deductions to benefit from these tax advantages during said fiscal year.

In this article, you will find the deductions that each community has and the necessary requirements to opt for them.

Communities with autonomous tax advantages:

– Andalusia

There are two types of tax deductions in Andalusia. The first is 20% of the amount destined for the investment, with a limit of 4,000 euros per year, provided that the company is a public limited company, a labor limited company, a labor private limited company, or a cooperative. The second is 50% for companies created by universities or research centers, with a limit of 12,000 euros. The invested company must meet the following requirements to benefit from this deduction:

– To maintain the registered office and tax domicile in Andalusia.

– To develop economic activity.

– If you invest when the company is incorporated, the company must have at least one employee (with a full-time contract and be registered with Spanish Social Security System). If you invest during a capital increase, always in the three years following its incorporation, the workforce must increase by at least one person and maintain this increase for 24 months. The term for the new workers hiring is two years.

The investment must meet the following requirements to obtain this deduction:

– To maintain the investment for a minimum of three years.

– Joint participation of the taxpayers and their families, including the third degree, must be a maximum of 40% of the company’s capital.

– Taxpayers must not exercise executive or management functions nor maintain an employment relationship with the entity.

– The acquisition must be formalized in a public deed.

– Aragon

The deduction applied in Aragon is 20% of the amount contributed up to a maximum of 4,000 euros per year, provided they are within the defined specifications.

The invested company must comply with the following requirements to benefit from this deduction:

– To maintain the registered office and tax domicile in Aragon.

– To carry out economic activities, not including the management of assets.

– The company’s equity must be equal to or less than 400,000 euros.

– The form of this company must be a public limited company, a private limited company, a labor limited company, or a labor limited company. The company cannot be listed on the stock exchange.

The investment must meet the following requirements to obtain this deduction:

– To maintain the investment for a minimum period of three years.

– Joint participation of the taxpayers and their families, including the third degree, must be a maximum of 40% of the company’s share capital.

– Taxpayers may be part of the company but not perform executive or management functions nor maintain an employment relationship with the company where the investment is made.

– Cantabria

The deduction applicable in Cantabria is 15% of the amount invested up to 1,000 euros.

The invested company must meet the following requirements to benefit from this deduction:

– To have the form of a public limited company, private limited company, or labor limited company, as well as to be considered as an SME.

– To maintain the registered office and tax domicile in Cantabria.

– To develop economic activity.

– If you invest when the company is incorporated, the company must have at least one employee (with a full-time contract and be registered with Spanish Social Security System). If you invest during a capital increase, always in the three years following its incorporation, the workforce must increase by at least one person and maintain this increase for 24 months. The term for the new workers hiring is two years.

The investment must meet the following requirements to obtain this deduction:

– To maintain it for a minimum of three years.

– Investors may not hold a managerial or executive position but can be members of the company’s board of directors.

– Joint participation of the taxpayers and their families, including the third degree, must be a maximum of 40% of the company’s share capital.

– To formalize the operation with a public deed.

These requirements must be maintained for a minimum period of three years.

– Castilla y Leon

Castilla y Leon offers a deduction for business investment of 20% of the amount invested up to a maximum of 10,000 euros, both in individual and joint taxation.

The invested company must meet the following requirements to benefit from this deduction:

– To maintain the registered office and tax domicile in Castilla y León.

– The form of the company must be a public limited company, private limited company, or labor company.

– In the year of investment or the following year, the company must increase and maintain for at least three years: its overall workforce (in terms of persons/years regulated in the labor legislation), the number of contracts signed with self-employed workers economically dependent on the company, and the number of persons who join the self-employed worker’s regime who are collaborating family members of the holders of shares or participations.

The investment must meet the following requirements to obtain this deduction:

– To maintain the investment for three years.

– The investment must be less than 45% of the company’s share capital and over 0.5%.

– The maximum investment, computable for the application of the deduction, will be the result of adding the following amounts: 100,000 euros for each increase of person/year in the workforce; 50,000 euros for each contract with self-employed workers economically dependent on the company and 50,000 euros for each registration of self-employed workers who have the character of collaborating family members.

– Catalonia

As Angels Investors, there are two deductions for investment in Catalonia. The first allows a tax deduction of 30% of the amount invested with a maximum of 6,000 euros. The second is a deduction of 50% with a maximum of 12,000 when it is a question of companies created or participated by universities or research centers.

The invested company must meet the following requirements to benefit from this deduction:

– To maintain the registered office and tax domicile in Catalonia.

– To carry out an economic activity beyond managing movable or real estate assets.

– To have at least one employee (with a full-time contract and registered with the Spanish Social Security System).

– The form of the company must be a public limited company, private limited company, or labor limited company.

– Turnover must be less than one million euros when investing.

– It cannot be listed on the national stock exchanges.

The investment must meet the following requirements to obtain this deduction:

– Taxpayers may be part of the board of directors. However, they may not carry out managerial or executive tasks.

– To formalize the operations to apply the deduction in a public deed.

– To maintain the investment for at least three years.

– Joint participation of the taxpayers and their families, including the third degree, must be a maximum of 35% of the company’s share capital.

– Extremadura

Extremadura has a 20% deduction on the amount invested, with a maximum of 4,000 euros.

The requirements that the invested company must fulfill to benefit from this deduction are:

– To maintain the registered office and tax domicile in Extremadura.

– To develop an economic activity that does not include the management of movable or real estate assets.

– If you invest when the company is incorporated, the company must have at least one employee (with a full-time contract and be registered with Spanish Social Security System). If you invest during a capital increase, always in the three years following its incorporation, the workforce must increase by at least one person and maintain this increase for 24 months. The term for the new workers hiring is two years.

The investment must meet the following requirements to obtain this deduction:

– To maintain the investment for at least three years.

– Joint contribution of the taxpayer and their families, including third-degree, is 40% of the company’s share capital.

– To formalize the operations applicable to the deduction in a public deed.

– Taxpayers may not exercise executive or management functions.

– Galicia

Galicia has a deduction of 30% of the amount invested with a maximum of 6,000 euros.

The invested company must meet the following requirements to benefit from this deduction:

– To maintain the registered office and tax domicile in Galicia.

– To carry out an economic activity beyond managing movable or real estate assets.

– If you invest when the company is incorporated, the company must have at least one employee (with a full-time contract and be registered with Spanish Social Security System). If you invest during a capital increase, always in the three years following its incorporation, the workforce must increase by at least one person and maintain this increase for 24 months. The term for the new workers hiring is two years.

The investment must meet the following requirements to obtain this deduction:

– To maintain the investment for at least three years.

– Joint contribution of the taxpayer and their families, including third-degree, is 40% of the company’s share capital.

– To formalize the operations applicable to the deduction in a public deed.

Likewise, Galicia has another deduction that is not subject to the aforementioned requirements. This is 15% of the capital invested with a maximum of 9,000 euros. The tax credit is subject to companies that are public limited companies, private limited companies, labor companies, and cooperatives. Moreover, the invested companies must prove that they are innovative SMEs and have obtained the qualification of technology-based employment or be owned by universities or research organizations.

– Balearic Islands

The Balearic Islands have a deduction of 30% on the amount invested with a maximum of 6,600 euros in individual declarations. For joint declarations, the limit is the same, but per taxpayer. Provided that the invested company is a public limited company, private limited company, labor public limited company, or labor private limited company.

There is another deduction for investment of 50% when it is carried out in companies participated by research centers or universities with a maximum of 13,200 euros.

The invested company must meet the following requirements to benefit from these deductions:

– To maintain the registered office and tax domicile in the Balearic Islands.

– To have a full-time employee and registered in the Spanish Social Security System, at least.

– When investing through a capital increase, the company must have been incorporated within the two years preceding the date of the increase.

– To maintain the total average workforce in the terms of persons per year regulated by labor regulations.

– To carry out an economic activity, not including the management of movable or real estate assets.

– Its annual turnover may not exceed 2 million euros.

The investment must meet the following requirements to obtain these deductions:

– Joint contribution of the taxpayer and their families, including third-degree, is 40% of the company’s share capital.

– To maintain the investment during four fiscal years.

– To formalize the operation in a public deed.

– Taxpayers may form part of the board of directors of the company, but may not perform executive or management functions.

These requirements must be fulfilled in a minimum period of four years.

– Madrid

There are three deductions in Madrid. The first is 30% of the amount invested in public limited companies or private limited companies with a limit of 6,000 euros. The second is 50% in labor public limited companies, labor private limited companies, and cooperatives with a limit of 12,000 euros. The last one is 50% of companies created or participated by universities or research centers with a limit of 12,000 euros.

The invested company must comply with the requirements to benefit from this deduction:

– To maintain the registered office and tax domicile in Madrid.

– To carry out any economic activity other than the management of assets.

– If you invest when the company is incorporated, the company must have at least one employee (with a full-time contract and be registered with Spanish Social Security System). If you invest during a capital increase, always in the three years following its incorporation, the workforce must increase by at least one person and maintain this increase for 24 months. The term for the new workers hiring is two years.

The investment must meet the following requirements to obtain this deduction:

– To maintain the investment for three years.

– Joint contribution of the taxpayer and their families, including third-degree, is 40% of the company’s share capital.

– Murcia

Murcia applies a deduction of 20% of the amount invested with a maximum of 4,000 euros per year.

The invested company must meet the following requirements to benefit from this deduction:

– To be a public limited company, private limited company, labor public limited company, cooperative, or labor private limited company.

– To maintain the registered office and tax domicile in Murcia in the three years following the constitution or extension.

– To carry out an economic activity during the next three fiscal years, not including the management of movable or real estate assets.

– If you invest when the company is incorporated, the company must have at least one employee (with a full-time contract and be registered with Spanish Social Security System). If you invest during a capital increase, always in the three years following its incorporation, the workforce must increase by at least one person and maintain this increase for 24 months. The term for the new workers hiring is two years.

The investment must meet the following requirements to obtain this deduction:

– Taxpayers may be part of the company’s board of directors but not perform executive or management functions for ten years nor maintain an employment relationship with the company where the investment is made.

– To maintain the investment for three years.

– Joint contribution of the taxpayer and their families, including third-degree, is 40% of the company’s share capital.

– To formalize the operation in a public deed.

– The application of the deduction must be communicated in advance to the regional administration.

Special conditions of the Basque Country and the Community of Navarre:

The foral regime (a specific territorial regimen) applies to the Basque Country and Navarre. Their funding system grants the power to these Historical Territories to maintain, establish and regulate their own tax regime, which includes claiming, managing, settling, collecting, and inspecting most of the state taxes. The contribution of these territories to the funding of the general charges of the State not assumed is through an amount called “quota” or “contribution”.

To find out the tax advantages associated with investments in start-up companies in each of the three territories of the Basque Country and the Autonomous Community of Navarre, consult the competent public bodies.

Achieving better control of the risk-return ratio in your investments requires having a diversified portfolio. At Fellow Funders, we facilitate investment opportunities in startups that, as we have explained, will impact your tax return. Through our equity crowdfunding platform, you can build your diversified investment portfolio with comprehensive transparency and rigor.

This document has been prepared by Fellow Funders PSFP, S.A.U. (“Fellow Funders”) according to the information obtained from the Spanish Tax Agency.

Any information on tax deductions should be verified with a tax advisor. Not all taxpayers have access to the same tax advantages, and the tax information provided by Fellow Funders, if any, may be a generalization not applicable to all scenarios.