Guide to tax incentives for investments in StartUps

Guide to tax incentives for investments in StartUps

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  Equity Crowdfunding

Equity Crowdfunding, is a private alternative investment that exists thanks to the internet and allows users of crowdfunding platforms to invest directly in companies.

When a company goes public, the growth that generates the most profitability to its investors has already happened. Investment crowdfunding allows you to keep up with the growth of companies with potential that can still generate three-figure returns.

Investing in newly created companies implies uncertainty about future profitability and even the capital itself. Thanks to tax incentives or this type of investment we can mitigate this uncertainty.


  Tax incentives for investing in Equity Crowdfunding

For the purposes of Personal Income Tax (IRPF) in Spain, it is a complex regime where part of the taxation will be determined by the Autonomous Community where the taxable person resides. Thus, different Autonomous Communities have introduced deductions to encourage investment in new or recently created entities (start-up).

The Personal Income Tax Law establishes a deduction of 30% of the amounts used to subscribe to shareholdings in newly created entities, with a limit of €60,000 per year.

If some type of regional deduction is made for the same concept, the state deduction base should be reduced, i.e., the state and regional deduction cannot be applied on the same amount.

Therefore, an investment of €10,000 in the shareholding of a start-up hould entail a tax saving of €3,000 on the income tax declaration

Essentially, the requirements are:

  • The investment in the entity must occur within its first three years.
  • The investment must be held for a minimum of three years.
  • It cannot be a control investment.
  • The entity must carry out economic activities.
  • The entity's own funds must not exceed €400,000 at the time of the investment.
  • The entity must certify that it is in compliance with the requirements.

Likewise, there is a personal income tax exemption on the capital gains generated in the transfer of shares in these entities provided that the amount obtained is reinvested in shareholdings of other start-up. For partial reinvestments, the exemption will be partial.

If you wish, you can check the full law at the following link:

https://www.agenciatributaria.es/static_files/AEAT/Contenidos_Comunes/La_Agencia_Tributaria/Le_Interesa/2018/LPGE_2018.pdf