What are the tax incentives for investors brought by the Startup Law this 2023?

In 2023, the Startup Law will come into force, which has several tax incentives for investors and entrepreneurs, meaning that they can enjoy up to a 50% tax deduction. This means that they will be able to enjoy up to a 50% deduction of the amount. Do you want to know more? Stay until the end and learn about the new tax incentives for investors this 2023, let’s get to it!

What is the purpose of the Startup Law?

The Startups Law aims to promote the creation and relocation of startups in Spain. Especially those considered micro, small and medium-sized companies driven by entrepreneurs. A law designed to support innovative entrepreneurship.

This law also facilitates the creation of entrepreneurship, since it will be possible to create a startup in less than six hours and with only 1 euro. All by means of an electronic document and its subsequent registration in the commercial registry.

You may also be interested in: Frequent mistakes when setting business goals

What tax incentives are obtained with the Startup Law?

This new law provides different tax benefits that make it attractive for investors and entrepreneurs. To name a few, there will be a reduction of taxes on Corporate Income Tax and Non-Resident Income Tax.

Also, it will increase the deduction for Business Angels, as well as increase the maximum base. The latter will allow investors to deduct up to 50,000 euros from their tax returns. Turning this law into an attractive idea for everyone.

What are the improvements to the deduction proposed by the new tax incentives?

One of the most attractive tax incentives is the deduction of greater importance. This came into effect last January 1st and consists of an increase in the deduction applicable to personal income tax that supports entrepreneurs.

In this case, the deduction will increase from 30% to 50% of the investment made. In turn, the maximum investment eligible for deduction increases from 60,000 euros to 100,000 euros per investor and per year. This means that the maximum annual investment will increase from 18,000 to 50,000 euros.

Another major improvement in the deduction is the increase in the investment term. The term was extended from three to five years. In these, the investment can be executed since the company was structured. In case the company is emerging, the term is extended to seven years.

What is required for the deduction to be applicable?

In order for a company to be able to apply this deduction, it must meet a series of requirements that guarantee its compliance with the entrepreneurial or start-up company category.

The first thing investors must ensure is that, at the beginning of the investment year, the company’s own funds do not exceed 400,000 euros. Another fundamental requirement is that the investor, together with his or her second-degree relatives, does not hold more than 40% of the company’s capital.

As a last requirement for investors, the participation that gives right to the deduction must be sold after three years have passed and before twelve years have passed since the investment. Not to mention that the deduction will only be available to temporary investors (Business Angels).

You may also be interested in: Expansion and Diversification Strategies

What are Business Angels or temporary investors?

The Business Angels is a person who invests his money, experience and contacts in new companies generated by entrepreneurs. All with the goal of obtaining an equity stake and a profit in the future.

What do Business Angels hope to achieve with their investment?

This type of investor is not looking for a return on capital, but rather, they really want to participate in the project and contribute their knowledge. However, the investment made by Business Angels is temporary, since it usually lasts between three to seven years. In this way, other investors can be given a chance.

In addition, they enable new start-ups to gain liquidity, financing, strength, contacts, market confidence, credibility and publicity.

What do we recommend to make the most of these tax incentives in 2023?

This 2023 is the year to invest if you are part of some of these investment entities. Since you will be able to enjoy a higher deduction percentage and the tax incentive will be applied on a higher invested amount, generating a higher savings and a better profit. 

The important thing is that you must remember to report your participation in the twelve years of the stipulated time. Since, if you fail to do so, you will have to repay the deductions applied with interest.

You may also be interested in: Tax obligations for the self-employed in Spain 2022

If you are interested in knowing how to enjoy the tax incentives that 2023 brings for investors, do not forget to contact our team of professionals. They will provide you with the information you need. All you have to do is contact us at tasconsultoria@tas-sl.es and schedule your free advice. Start 2023 on the right foot!