Investing in Spanish Start-ups: Tax and Legal Considerations for Investors

Buying shares in start-ups has become one of the main investment alternatives for many companies and individuals in Spain. Although it brings many benefits and usually generates positive results, it is advisable to know all the legal and tax aspects surrounding this process, which is so common in many sectors.

Tax considerations

At a fiscal level, investment in technological start-ups is very attractive, since Law 35/2006 establishes a deduction of 50% (until 31-12-2022, it was 30%) of the capital invested in the IRPF when we acquire participations or shares (with a maximum base of 100,000 euros per year; until 31-12-2022, it was 60,000 euros).

In addition to this, we should also know that all the advantages related to the regional level are complementary to the one mentioned above, so that, at a fiscal level and concerning taxes, we can say that there are interesting benefits when investing in start-ups.

Legal considerations

Intellectual property is one of the main legal considerations when investing in a start-up company. Partners should register trademarks and acquire domains, bringing intellectual property to the project, and not just doing it on a personal level.

When studying a specific start-up, it is essential to check that everything related to domains, patents and trademarks is registered in the name of the company, to avoid major problems in the future and to avoid registering losses with your financing.

On the other hand, any type of debt, claim or lawsuit pending against the company may compromise the investment, and it is essential to delve into the reasons for this and understand why the company has reached this limit.

Benefits of Investing

We have already seen the tax benefits that investing in start-ups can bring. However, we can still offer an extensive list of advantages that make a difference in this type of project:

  • Adding value. In addition to the potential economic return, you can also add value and receive value through the project, forging potential economic alliances, generating a good network of suppliers and accessing business angel networks.
  • Diversity in investments. At the end of the day, we are talking about one more investment, so we will increase the versatility and diversity of our portfolio.
  • Possibility of receiving high returns. If the choice is made with precision, the company can grow a lot and its turnover to soar, obtaining a high return on investment.
  • Connection to innovative ideas and projects. In addition to the investment implications, getting involved with a promising start-up can also provide us with innovative ideas that could potentially be applied in our own company.
  • Guaranteed legal certainty. Current legislation treats funding platforms as markets regulated by the CNMV, guaranteeing transparency at all stages of the investment process.

Investment process

If you were wondering how to invest in small companies, we are going to detail the step-by-step procedure that you will have to follow so that your start-up financing can be carried out with guarantees of success:

  1. We must use platforms for investing in start-ups that connect us with the companies in question and we can analyse in detail all the relevant information that will allow us to make the decision later.
  2. We will apply filtering criteria that will allow us to detect which companies are likely to succeed, paying special attention to potential risks and indicators that could lead to early failure.
  3. After that, we will make an evaluation of the main opportunities to be taken into account, taking into account all these indicators of entrepreneurship, and determining which is the company with the best expectations.
  4. Having chosen our target start-up, it is time to start a due diligence and analysis process, in which we will check that the company is up to date with its fiscal, financial and technological obligations.
  5. We will make the first contact with the companies in order to assess the opportunities and receive feedback from them on their intentions and expectations in the short, medium and long term.
  6. Finally, we will provide the capital corresponding to the investment, and we will receive regular reports on the development of the company and the return on the capital with which we have financed it.

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Common challenges

When it comes to buying shares in start-ups, it is quite likely that beginners are somewhat lost and have a lot of doubts about procedures and possible venture capital relationships.

The main and most common challenge is to find a business opportunity that presents an interesting project, with entrepreneurs involved at the helm and in sectors whose commercial development will benefit the start-up in question.

In this sense, the presence of co-investors can be key to dispelling doubts and receiving information based on experience. The more diversified the portfolio and the greater the number of investments made, the greater the knowledge will be, and the better opportunities can be found.

Taking into account the advantages and tax and legal implications of buying shares in start-ups, we can say that it is a very attractive process in terms of diversifying the investment portfolio and generating a much stronger professional network of contacts, encouraging entrepreneurship.

If you have any questions on this topic, please contact our entrepreneurs and startups consultancy in Barcelona.


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