How to prove your status as a startup company?

The new Law 28/2022, of 21 December, on the promotion of the startup ecosystem (also known as Startup Law), establishes that accreditation as a startup company will be carried out by the National Innovation Company (hereinafter, “ENISA“). This accreditation will be necessary to qualify for the tax benefits established by the law.

The requirements for being considered as an emerging company are as follows:

To be a newly incorporated company or a company that has not been incorporated for more than 5 years from the date of its registration in the Commercial Register (“Registro Mercantil”), or 7 years in the case of the biotechnology, energy, or industrial sectors, among others.
Not to have arisen from the merger, spin-off, transformation, concentration, or segregation operations, except those arising from other start-ups or those spin-off technology-based companies originating in public universities.
Not distributed or have distributed dividends since the incorporation of the company.
Not be listed on a regulated market.
Have their headquarters, registered office, or permanent establishment in Spanish territory.
At least 60% of the workforce must have an employment contract in Spain.
Develop an innovative entrepreneurial project with a scalable model.

The application of the tax benefits derived from accreditation as an emerging company finishes in the following cases:

Cease to meet any of the above requirements.
When the company reaches the age limit to become an emerging company, which is 5 years, in general cases, or 7 years for those belonging to the biotechnology sector, since its incorporation.
Extinction of the company before the end of 5 or 7 years from its incorporation.
Acquisition by a company that is not considered an emerging company.
Turnover of more than 10 million euros per year. Not specified, but it is understood that this figure, in the case of a group of companies, refers to the group’s turnover.
Carry out an activity that generates significant damage to the environment.
Have partners who hold, directly or indirectly, a stake of at least 5% of the share capital or whose directors have been convicted by a final judgment for any of the aforementioned offences.

The period for determining start-up status will be 3 months from the date on which the company has submitted all the information relating to the application for accreditation, including any additional information that may have been requested based on the analysis carried out by ENISA. Positive administrative silence is established if no response is received after this period.

This period of 3 months will be applicable from six months after the entry into force of this Law. Consequently, if a company applies for accreditation as an emerging company during the first half of 2023, the deadline for ENISA to respond would be 30^th September 2023.

Regarding the requirement that 60% of the workforce must have an employment contract in Spain, it is not established whether companies that do not have workers are excluded from the application of this Law, which means that this will depend on what is specified in the regulations or on the interpretation made of this provision.

Doubts also arise as to the scope of application of these benefits for previous years, in particular for those companies that are not newly incorporated, but which were incorporated less than 5 (or 7) years ago, which have had benefits previously and have already been taxed at 25% corporate income tax; or whether the effects of the tax benefits of this Law are applied in the year in which the start-up status is requested or in which ENISA accredits it.

If you have any doubts related to this or other tax, accounting, or legal issues, please do not hesitate to contact our tax advisors in Barcelona for a entrepreneurs and startup consultancy.

How to prove your status as a startup company?

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