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New Draft Law on Entrepreneurial activities


The Council of Ministers approved last Friday the preliminary draft law to encourage  entrepreneurial start ups and the internationalization of entrepreneurial activities. It is a comprehensive and complete law encompassing the work of practically all of the ministerial departments, intending to facilitate all entrepreneurial and business activities. The legal reforms range from the requirements for the incorporation of companies and their tax regime to support the financing and the need to smoothen the relationship between companies and public administrations, and, if necessary by providing more facilities to solve business challenges through various means.

The draft law embodies one of the most important structural reforms of the Government's program. It complements the Royal Decree Law of February 22, 2013 on labor support to entrepreneurs and measures encouraging growth and job creation, by adopting certain measures in support of entrepreneurial activities, announced by the President of the Government in the Debate on the State of the Nation.

The proposed legislation includes significant aspects relevant to foreign investments in real estate, securities and business activities that will surely prove to be controversial during the parliamentary process. (read below)


The draft includes a series of measures to promote entrepreneurial culture and to facilitate the start up of business activities.

The new “Entrepreneur  with Limited Liability”

The draft law creates a new trade figure, the “entrepreneur with limited liability” (ERL), implying that the liability for business debts will not affect their home dwellings if their value do not exceed three hundred thousand Euros.

To protect creditors and the safety of legal traffic, such limitation of liability shall be made public through appropriate channels to be approved and regulated through future legislative actions.

However, the limitation of liability shall not apply to those debts considered to be “debts of public law”, or when the employer acts fraudulently or negligently in the fulfillment of its obligations towards third parties.

Successive incorporation of limited liability companies: new corporate subtype

To reduce the initial cost of incorporating a company, the draft law allows for the creation of companies with a capital figure of less than three thousand Euros (the minimum for limited liability companies), but sharing a regime identical to the limited liability companies, except for certain specific conditions intended  to protect the interests of third parties which conditions  shall establish limits to the remuneration of partners and administrators, as well as a joint and several liability of partners in the event of liquidation.


Creation of Advisory Points

In order to speed up the start up of entrepreneurial activities the Law provides for the creation of entrepreneur advisory points, which will be “single windows” through which the formalities for the incorporation, exercise and cessation of business activity can be accomplished. The electronic point of advice of the Ministry of Industry, Energy and Tourism will provide all of the services described in the law. This point stems from the integration of the multiple similar points existing at State level. On the other hand, “entrepreneurs of limited liability” will be able to proceed through simplified forms and computerized systems.



To alleviate the financing problems currently affecting small and middle size companies the law provides for a specific VAT regime whereby taxpayers with a turnover not exceeding two million Euros per year will be entitled to pay the due VAT on a cash basis as opposed to the usual accrual principle in force. In turn, such taxpayers will not be entitled to deduct VAT from amounts due to suppliers until such amounts are actually paid.

Investment incentives

Companies with a yearly turnover of less than ten million Euros will be entitled to deduct up to 10 per cent of the profits obtained in the relevant tax period that are reinvested in the economic activity. In addition, the law provides for incentives for R+D activities and for the transfer of intangible assets.


Tax Incentives to "business angels"

In order to encourage private investors to provide (i) financing to newly formed companies or entrepreneurial activities (seed capital) or (ii) their business or professional knowledge for the development of the target company, the law provides for a new tax deduction and exemptions from the applicable Personal Income Tax, as follows:

• Deduction of 20 per cent in the State share of the Personal Income Tax payable by the “angel”, applicable at the time the investment is made available to the company, with a maximum deductible limit of twenty thousand Euros per year.

• Total exemption of capital gains realized at the time the investor leaves the company, provided that the relevant sums are reinvested in another new or recently created entity.


Reduction of administrative burdens

Among different measures intended to reduce the administrative (bureaucratic) burdens that newly formed companies must face, the law provides for the following:

a)            Reduced obligations to provide statistical information that will apply during the first year of existence of companies with less than fifty workers or employees.

b)           In labor matters, the regulations will allow entrepreneurs with a single Labor Center and less than 25 employees to undertake the prevention of occupational risks direct, that is, without having to resort to a certified external third party firm.

c)            Likewise, the draft law eliminates the requirement that companies must have, in each workplace, a book of visits permanently available to Labor and Social Security Inspectors in the area of occupational risk prevention.  In turn, the Inspectorate for Labor will be responsible for maintaining such information by electronic means.

On the other hand, employers will be able to authenticate their Books through their computer systems.

d)           With regard to services, the Law on Urgent Measures for the Liberalization of Trade and Services, of December 26, 2012, is modified to increase the maximum surface area (square meters) of establishments that will trigger the obligation of securing a municipal operating license for the business, as well as to expand the list of activities that will be exempted from applying for a municipal license at all.

In the field of accounting, the need for companies to disclose economic and financial information is rationalized. Thresholds for the preparation of Abbreviated Balance Sheet s are amended in order to increase the number of businesses entitled to produce the abridged (short form) Balance Sheet and Annual Report and exempted from producing the Cash Flow charts.

Attracting talent and foreign investment: new regime of visas and residence permits

The draft law facilitates and speeds up the granting of residence permits for “reasons of economic interest” by implementing a fast procedure before a single authority to grant permits to individuals who qualify as:

1.  Investors carrying out a significant economic investment or participating in business projects that are certified to be of general interest; for example, because of their impact on the creation of jobs or for their contribution to scientific or technological innovation.

The term "significant" is still not defined in the draft law and will most likely be leftt to subsequent regulation; or to clarification during the parlimantary process.

2. Entrepreneurs, with respect to an activity of innovative nature and special economic interest. Factors that will help to give priority to any such projects will be (i) The creation of employment; (ii) the professional profile of the applicant, (iii) the features of the business plan or (iv) the added value that the project will entail for the Spanish economy.

3. Highly qualified professionals, including

  • Highly qualified Managing personnel that participate in a business project of general interest.
  • Post-graduates from accredited universities and schools of business; or
  • Professionals wishing to carry out research, development and innovation activities in public or private entities.

4. Transfers to Spain: foreigners who move to Spain within the framework of a working or professional relationship; or for reasons of professional training, will be granted residence visas for a duration equal to the relevant period.

Two material but controversial aspects of the proposed legislation - that will surely be opened to changes during the parliamentary process - are those related to the granting of residence permits to foreigners investing not less than 500.000€ in the acquisition of real estate and not less than two million Euros in the acquisition of Spanish public debt.

PROJECT "UNDERTAKE IN 3 (Steps)" (Emprende en 3)

In addition, the Council of Ministers approved a resolution to encourage and expedite procedures for start ups. The project "Undertake in 3" takes advantage of existing collaboration agreements between administrations, new technologies and the implementation of “Responsible Statements” (individual affidavits from the applicant entrepreneur), intended to replace the previous licensing regime by a regime of control “a posteriori”.

"Emprende en 3" is a telematic procedure for the incorporation and start up of business projects. It is basically a platform developed with the participation of the General State Administration, the Autonomous Regions and Local Entities (Municipalities) , represented by the Spanish Federation of Municipalities and Provinces.

The platform allows to simultaneously manage proceedings at the three levels of the Public Administration (the information system of the Ministry of industry, Energy and Tourism; the SARA Network, that connects to all the administrations of Spain, and the Portal of Local Entities) by using the technological resources already existing in the Administration, so that its implementation will not represent any additional cost. 



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