Digital nomads and startups: fostering the start-up ecosystem

The Official State Gazette (BOE) today publishes the long-awaited Law 28/2022, of 21 December, fostering the start-up ecosystem, of which we highlight, for the matter at hand:

In a increasingly globalised and interdependent economy and with a The growing weight of technology-based companies and remote work with digital media, attracting talent and investment through creating ecosystems conducive to the establishment of entrepreneurs or remote workers, known as ‘digital nomads’, to creation and growthor (scale up) of innovative, knowledge-based, digitally-based and fast-growing companies, known as start-ups or startups and to attract investors specialized in the creation and growth of these companies, also known as "business angels".

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Start-ups have specific characteristics that make it difficult to fit into the traditional regulatory framework. Firstly, the high risk arising from its high innovative content, the uncertainty about the success of its business model, which hinders financing in the early stages, by requiring capital to be able to mature and test its ideas before the company starts generating income; second, the potential for exponential growth through economies of scale, which requires large capital investments to enable its rapid expansion if successful; thirdly, its dependence on the recruitment and retention of high-skilled and high-productivity workers from the initial stages of the company, in which there is no income stream to remunerate them by means of classical wage instruments and, finally, the exposure to strong international competition for foreign capital and talent.

All these characteristics of start-ups do not fit well with traditional regulatory frameworks in the tax, commercial, civil and labor fields.. This justifies a differentiated treatment with respect to companies with conventional business models. For this reason, the competition for the attraction of investment and talent in the new digital economy has led to different programs to promote startups in the countries around us, which usually incorporate three main elements: (i) tax benefits for entrepreneurs, workers and investors, (ii) reduction of administrative burdens and visa facilitation and (iii) flexibility in the management of the company and in the application of commercial and insolvency principles.

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Article 1. Object.

1. The purpose of this law is establish a specific regulatory framework to support the creation and growth of start-ups in Spain, taking into account the distribution of competences on the matter between the State and the Autonomous Communities.

2. It also establishes a system for monitoring and evaluating its results on the Spanish start-up ecosystem.

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TITLE I

Tax incentives, attracting foreign investment and retaining talent

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CHAPTER II

Attracting foreign investment and retaining talent

Article 9. Identification requirements for foreign investors.

1. The natural persons who do not have Spanish nationality, who wish to invest in Spanish start-ups and do not reside in Spain, must apply to the Spanish State Tax Administration Agency for a tax identification number. They shall not be required, for this purpose, to obtain an alien's identity number.

Where the investor is a legal person or an entity without legal personality of foreign nationality, the representative applying on its behalf for the tax identification number must be assigned a tax identification number. Their power of attorney may be stated in a notarial document or in a mandate contract with representation that expressly states the acceptance of the tax representation. If the notarial document has been issued by a foreign notary, it will not be required to adapt its content to the Spanish legal system.

In the event that the investment in a start-up company is not accredited within six months of the allocation of the investor's tax identification number, the State Tax Administration Agency may revoke the tax identification number assigned to the foreign investor.

2. The State Tax Administration Agency shall enable an electronic procedure, for the purposes of paragraph 1, to be resolved within ten working days of the submission of the request for the tax identification number, accompanied by the documentation, if any, required.

The models to request this number will be available in electronic format and its presentation may be made using an electronic certificate qualified in accordance with the conditions established in letters a) and b) of paragraph 2 of article 9 of Law 39/2015, of October 1, of the Common Administrative Procedure of the Public Administrations, and its implementing regulations in force at all times, and that is admissible by the State Tax Administration Agency.

3. When the investment takes place to constitute a company and it is processed electronically through the Information Center and Business Creation Network (CIRCE), through a Single Electronic Document (DUE), regulated in the third additional provision of Royal Legislative Decree 1/2010, of July 2, which approves the consolidated text of the Law on Capital Companies, the investor may request the State Tax Administration Agency, through the Point of Attention to the Entrepreneur, the assignment of a tax identification number for himself. In another case, the acting notary will immediately send a copy of the deed to the State Tax Administration Agency, requesting the assignment of a tax identification number for the investor.

Notaries may also request the allocation of the tax identification number for foreigners referred to in this article, when they join as partners in a start-up company on the occasion of an increase in their share capital or other corporate operation.

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Third final provision. Amendment of Law 35/2006, of 28 November, on Personal Income Tax and partial amendment of the laws on Corporation Tax, Non-Resident Income and Wealth Tax. (...)

Five. Article 93 shall read as follows:

‘Article 93. Special tax regime applicable to workers, professionals, entrepreneurs and investors posted to Spanish territory.

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Fifth final provision. Amendment of Law 14/2013, of 27 September, on support for entrepreneurs and their internationalisation.

Law 14/2013, of 27 September, on support for entrepreneurs and their internationalisation, is amended as follows:

One. Article 61(1) shall read as follows:

‘Article 61. Entry and stay in Spain for reasons of economic interest.

1. Foreigners who intend to enter or reside, or who already reside, in Spain will be facilitated their entry and stay in Spanish territory for reasons of economic interest in accordance with the provisions of this section, in those cases in which they prove to be:

a) Investors.

Entrepreneurs.

c) Highly qualified professionals.

Investigators.

e) Workers who carry out intra-corporate movements.

f) International teleworkers’

Two. Article 62(3)(c) shall read as follows:

‘Article 62. General requirements for stay or residence.

c) Lack of a criminal record in Spain and in the countries where he has resided during the last two years, for crimes provided for in the Spanish legal system. In addition, a declaration responsible for the absence of a criminal record for the last five years shall be submitted.’

Three. Article 67(1) is amended.

‘1. The initial residence permit for investors shall be for a period of three years without prejudice to Article 66(3) for purchases of unformalised immovable property.’

Four. Chapter III of Section 2a of Title V on Entrepreneurship and Entrepreneurship is amended:

Article 68 is deleted and the following Articles are amended as they stand.

Article 69 shall read as follows:

‘Article 69. Residence for entrepreneurs.

1. Those foreigners who apply to enter Spain or who are holders of a residence permit or visa intend to start, develop or direct an economic activity as an entrepreneur, may be provided with a residence permit for business activity, which will be valid throughout the national territory and valid for three years. Once this period has expired, they may apply for the renewal of the residence permit for two years, being able to obtain permanent residence after five years.

The application for authorization of residence of entrepreneur will be made by the interested party himself or through a legal representative and electronically before the Unit of Large Companies and Strategic Collectives.

In the event that the foreigner is outside Spain, the application for authorization and visa will be made simultaneously through a single instance that will start the authorization and visa processing consecutively.

2. Applicants shall comply with the general requirements laid down in Article 62 and the legal requirements necessary for the commencement of the activity, which shall be those laid down in the relevant sectoral legislation.’

Article 70 shall read as follows:

‘Article 70. Definition of entrepreneurial and business activity.

1. Entrepreneurial activity will be understood as one that is innovative and / or has special economic interest for Spain and for this purpose has a favorable report issued by ENISA.

The request will be addressed to the Unit of Large Companies and Strategic Collectives that will automatically request a report on entrepreneurial and business activity from ENISA. This report, of a mandatory nature, will be evacuated within ten working days.

In the event that the foreigner is outside Spain, once he has the authorization granted, he will apply for the corresponding residence visa.

2. For the assessment of entrepreneurial and entrepreneurial activity, the following will be taken into account:

a) The professional profile of the applicant and his involvement in the project. If there are several partners, the participation of each of them will be evaluated, both those who apply for a visa or authorization and those who do not require it.

b) The business plan, which will include a description of the project, the product or service it develops, and its financing, including the required investment and possible sources of financing.

c) The elements that generate added value for the Spanish economy, innovation or investment opportunities.

Five. Article 71 is amended as follows:

‘A residence permit for highly qualified professionals, valid throughout the national territory, may be applied for by companies that require the incorporation into Spanish territory of foreign professionals graduated or postgraduated from prestigious universities and business schools, graduates of higher vocational training, or specialists with professional experience of a comparable level of at least 3 years, in the terms established in the instructions referred to in the twentieth additional provision of this law.

Accreditation of compliance with the above requirements will be carried out only once, leaving the company registered in the Unit of Large Companies and Strategic Collectives. Such registration shall be valid for three renewable years if the requirements are maintained. Any modification of the conditions must be communicated to the Large Companies and Strategic Collectives Unit within thirty days. If this change is not communicated, the company will no longer be registered in the Unit.

The residence permit for highly qualified professionals shall be three years or equal to the duration of the contract, whichever is shorter. Once that period has expired, he may apply for the renewal of the residence permit for two years and may obtain permanent residence after five years.’

Six. Article 72(3) is amended to read as follows:

‘3. The period of validity of a residence permit for research shall be three years or equal to the duration of the hosting agreement or contract, whichever is shorter. Once that period has expired, he may apply for the renewal of the residence permit for two years and may obtain permanent residence after five years, in accordance with the provisions of Article 75(2).’

Seven. Article 73(3)(b) is amended to read as follows:

'(b) National residence permit for intra-corporate transfer: authorisation shall be granted in cases not referred to in point (a) or after the expiry of the maximum duration of the transfer provided for in the preceding paragraph. The period of validity of the residence permit shall be three years or equal to the duration of the transfer.’

Eight. A fourth paragraph is inserted in Article 76:

‘Article 76. Authorisation procedure.

4. The passport shall be a sufficient document to register with the Social Security during the first six months of residence or stay in the categories regulated by this section and in those cases in which the foreigner is not in possession of the alien identification number (NIE), without prejudice to the subsequent application for the NIE.

Nine. A new Chapter Va is inserted in Section 2a of Title V to read as follows:

‘CHAPTER V A

International teleworkers

Article 74a Definition.

1. A third-country national who is authorised to remain in Spain for the purpose of exercising a work or professional activity at a distance for companies located outside the national territory, through the exclusive use of computer, telematic and telecommunication means and systems, is in a situation of residence by teleworking of an international nature. In the case of exercising a work activity, the holder of the authorization for teleworking of an international nature may only work for companies located outside the national territory. In the case of exercising a professional activity, the holder of the authorization for teleworking of an international nature will be allowed to work for a company located in Spain, provided that the percentage of said work does not exceed 20 % of the total of his professional activity.

2. Qualified professionals who accredit that they are graduates or postgraduates of universities of recognized prestige, professional training and business schools of recognized prestige or with a professional experience of at least three years may apply for a visa or authorization to telework

Article 74b - Requirements

In addition to the general requirements of Article 62, the following shall be accredited:

a) The existence of a real and continuous activity for at least one year of the company or group of companies with which the worker has an employment or professional relationship.

b) Documentation proving that the employment or professional relationship can be carried out remotely.

c) In the case of an employment relationship, the existence of the same must be proven between the worker and the company not located in Spain for at least the last three months prior to the submission of the application, as well as documentation proving that said company allows the worker to perform the labor activity remotely.

d) In the event of the existence of a professional relationship, it must be proven that the worker has a commercial relationship with one or more companies not located in Spain during at least the last three months, as well as documentation proving the terms and conditions under which he will exercise the professional activity remotely.

Article 74c. Visa for international teleworking.

1. Foreigners not resident in Spain, who intend to reside in Spanish territory in order to telework remotely for a company not located in Spain, apply for an international teleworking visa which shall be valid for a maximum of one year, unless the period of work is shorter, in which case the visa shall be valid for the same period as the visa.

2. The international teleworking visa will constitute sufficient title to reside and work remotely in Spain during its validity.

3. Within sixty calendar days before the expiration of the visa, international teleworkers who are interested in continuing to reside in Spain may apply for residence authorization for an international remote worker, provided that the conditions that generated the right are maintained.

Article 74d. Residence for international teleworking.

1. Foreigners who are in Spain on a regular basis or who have accessed through the visa provided for in the previous article, may apply for a residence authorization in order to telework remotely for a company located abroad, which will be valid throughout the national territory.

2. The validity of this authorisation shall be for a maximum period of three years unless requested for a shorter period of work.

3. Holders of such authorisation may apply for renewal for periods of two years provided that the conditions which gave rise to the right are maintained.’

Ten. It is amends paragraph 1 of the seventeenth additional provision, which is worded as follows:

‘1. Upon completion of studies at a higher education institution, foreigners who have reached at least Level 6 in accordance with the European Qualifications Framework, corresponding to the degree accreditation, may stay in Spain for a maximum non-extendable period of 24 months in order to seek suitable employment in relation to the level of completed studies or to undertake a business project.’

Eleven. It is amends paragraph 6 of the 18th additional provision, which is worded as follows:

‘6. The period of validity of this residence permit for traineeships shall be 12 months or equal to the duration of the traineeship agreement, if shorter. This authorisation may be renewed once, and may not exceed two years in the total period of the initial authorisation and its extension. In the case of a traineeship contract, the duration shall be that provided for therein and governed by the labour law applicable at all times.’

Twelve. A new 20th additional provision is added to read as follows:

‘Twentieth additional provision. Development of instructions with the requirements for visas and residence authorizations referred to in this law.

The competent bodies are empowered to issue instructions with the specific requirements to be met by applicants for the visas and residence permits referred to in this law.

For the elaboration of these technical instructions, the Government will set up a working group in which the ministries with competence in the matter will participate. Those instructions shall be drawn up by 31 March 2023 and contain specific adapted requirements for applicants for visas and residence authorisations referred to in this law. The thresholds for the financial amounts used to assess the financial resources of applicants shall be referred to the Minimum Interbranch Wage (SMI).’

Thirteen. A new 21st additional provision is added as follows:

‘Twenty-first additional provision. Foreigner Identity Numbers and Cards.

The issuance of the Foreigner's Identity Number will be facilitated for applicants for residence authorizations granted under this law and persons intending to carry out activities related to the objectives of this law. To do this, a specific web page will be enabled for this group to request appointments online and it will be possible to count on various administrations and agencies for the face-to-face issuance of the Foreigner Identification Numbers.

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Twelfth final provision. Mandate for the approval of model statutes adapted to the needs of start-ups.

The Government will approve by royal decree, within three months of the entry into force of this law, different models of model statutes, which will be incorporated into the public deeds of constitution, both adapted to the needs of start-ups regulated by this law.

Thirteenth final provision. Entry into force.

This law shall enter into force on the day following that of its publication. in the "Official State Gazette".