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Spain: The new law to support start-up entrepreneurs offers tax benefits – even for foreign investors

Spain: The new law to support start-up entrepreneurs offers tax benefits - even for foreign investors

Gustavo Yanes – Tax Consultant in Spain

On September 19, 2013, the Spanish parliament ratified a law to support start-up entrepreneurs. According to tax consultant and lawyer Gustavo Yanes from Monereo Meyer Marinel-lo Abogados, the business law firm in Spain, this law provides a range of tax measures aimed at facilitating business start-ups in Spain:

1.The so-called „IVA de caja“ („Cash VAT“)

With the objective of easing liquidity strains that small and medium-sized companies as well as self-employed workers are suffering from these days, a new VAT legislation will be created.
In this context, taxable companies whose annual business volume does not exceed 2 Mio. Euros are eligible to make use of this legislation.

The application of this new VAT system has the following effects: on the one hand the Spanish VAT will only have to be paid after having received payment for customer billing, on the other hand a later payment of input tax takes place, namely after having paid the incoming invoice. Currently, Spanish companies and self-employed workers have to pay VAT at the moment of billing, i.e. irrespective of whether or not the tax has been collected, and in doing so finance the Spanish state.
In cases where clients do not pay invoices issued according to these special regulations over a period of at least a year, the entrepreneur will still have to pay the VAT. They have to do so as part of their tax returns for the last quarter of the year which follows the year in which the business or transaction took place. The same regulation is valid for the deduction of input tax.

2.Tax advantage for re-investment of profits

Companies whose annual business volume does not exceed 10 Mio. Euros, can deduct up to 10 % of the profit obtained in one financial year, as long as such amount is re-invested into their business activity.
This tax deduction is reduced to 5% when the taxable entity makes use of the reduced rate for corporate tax.

3.Incentive with regards to research, development and innovation

A further incentive for all companies, regardless of their business volume, is the possibility to deduct tax on investments into innovation, development or research activities made as from January 1, 2013, in order to reduce their corporate tax up to 0 (before it was only up to a limit of 35%/50% of the tax debt). In this context, deductions for innovation activities are limited to 1 Mio. Euros and for all 3 mentioned activities together to a total of 3 Mio. Euros. Furthermore, a reduction of 20 % of the corresponding amount of the tax deduction has to be applied. Finally, in the case of an insufficient corporate tax debt, the company can ask for a refund of the amounts not claimed in the corresponding financial years.

4.Incentive with regards to the transfer of intangible assets („Patent Box“)

With the objective of supporting the incentive for companies to invest into innovation and research activities, this tax advantage will be improved by shifting the incentive to the obtained net income of the transferred asset instead of the gross income. Additionally, the percentage for the deduction of the tax basis will be raised from 50 % to 60 %. However, this incentive cannot be combined with the deduction of reinvestments.

5.Incentive for „Business Angels“ (private investors)

A new tax incentive as regards income tax is being created in order to encourage the creation of equity capital of those that contribute to newly or recently founded companies, who not only invest their own capital but also their entrepreneurial and professional knowledge into the company (so-called „Business Angels“) or of investors who are only interested in providing capital.
This incentive is reflected in the reduction of the income tax by 20% of the paid amount for the acquisition of partner“s investments or corporate shares. The limit for this tax deduction is 50,000.- Euros p.a.

In the case of a transfer of company shares and its reinvestment into new shares or participations of a newly or recently founded company, the part of the reinvestment that exceeds the amount obtained through the transfer will be the part which is subject to deduction.

About Monereo Meyer Marinel-lo Abogados

Monereo Meyer Marinel-lo is a „full service“ law firm founded in 1989 specializing through their high level of intercultural competence and focus on consulting foreign banks and companies in Spain, especially from German-speaking countries. With offices in Madrid, Barcelona, Palma de Mallorca and Berlin and more than 50 lawyers, Monereo Meyer Marinel-lo is one of the leading firms in their field.

Monereo Meyer Marinel-lo is a founding member of CBBL, Cross Border Business Law AG (

For further information:

Monereo Meyer Marinel-lo Abogados
Estela Requena
Alfonso XII, 30 – 5ª planta
28014 Madrid

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