Table of Contents
Last week, I sat down with a client who told me, Richard, I pay almost 45% tax in Germany. Isn’t there something better in Europe?
I said to him, Have you heard about Spain’s new Startup Law?
His face lit up.
And rightly so. Because what the Spanish government introduced in 2022 is a real game-changer for international founders—especially for people like you, looking for smart tax strategies within Europe.
Before I walk you through the details, let me be upfront: not everyone benefits equally from this law. There are clear criteria and some pitfalls you should be aware of.
But if it’s a fit, it’s a real fit.
Let me show you what’s possible—and most importantly, whether it’s suitable for your situation.
Ready? Let’s dive into the world of Spanish startup incentives.
Your RMS
What is Spain’s Startup Law really about?
The Spanish Startup Law (officially “Ley de Startups”) came into force in December 2022. Its goal? To make Spain one of Europe’s most attractive startup hubs.
But what does this mean for you in practical terms?
The Three Pillars of the Law
The law is built on three essential pillars that can revolutionize your international tax planning:
- Tax Incentives: Reduced corporate tax for qualified startups
- Visa Facilitation: Simplified residence permits for founders and employees
- Less Bureaucracy: Digital processes and one-stop shops
Who qualifies as a “Startup” under Spanish law?
This is where it gets interesting—the definition is broader than you might think.
A company is considered a startup if it:
- Is less than 5 years old (or up to 7 years for biotech)
- Was not created by merger or split-up
- Has annual revenues of no more than 5 million euros
- Develops or deploys innovative technologies
- Shows potential to scale
This means that even established online businesses can benefit if they meet these criteria.
The Recognition Process
To take advantage, you must apply for official startup recognition. This process runs through the Spanish development agency (ENISA – Empresa Nacional de Innovación).
Processing typically takes 3–6 months. But don’t worry: with proper preparation, your odds are high.
Spain Startup Visa: Your Ticket to Europe
This is one of the strongest trump cards in the law: The Startup Visa makes it significantly easier to move to Spain and operate from there.
The Startup Visa in Detail
Spain’s Startup Visa offers several benefits over standard residence permits:
| Criteria | Startup Visa | Standard Investor Visa |
|---|---|---|
| Minimum investment | No fixed amount | €500,000 real estate |
| Processing time | 20–40 business days | 3–6 months |
| Validity | Up to 3 years | 2 years |
| Family reunification | Included | Separate application required |
Who is Eligible for the Startup Visa?
The visa targets three groups:
- Startup founders: You want to launch or relocate your company in Spain
- Startup employees: You work for a recognized startup
- Digital nomads: You work remotely for international startups
Especially interesting: you don’t have to be physically present in Spain to take advantage. It’s a flexible option for location-independent entrepreneurs.
The Road to Residency
The application process runs through the Spanish consulates in your home country. You’ll need:
- Proof of your startup qualification
- Business plan with a strong focus on innovation
- Proof of funding (no fixed minimum)
- Clean criminal record
- Health insurance
Tip: Prepare a detailed business plan. Spanish authorities place great value on the innovation potential of your project.
Tax Advantages: Where You Can Really Save
Now we’re getting to the heart of the matter. The tax incentives are what most of my clients are most interested in.
Reduced Corporate Tax for Startups
Normally, corporate tax in Spain is set at 25%. But for recognized startups, there’s a clearly reduced rate:
- 15% for the first four fiscal years
- 25% from the fifth year onward
In real terms: you save 10 percentage points in tax for the first four years. For profits of €200,000 per year, that’s €20,000 annually.
Let’s do the math:
Example Calculation:
Annual profit: €200,000
Normal corporate tax (25%): €50,000
Startup corporate tax (15%): €30,000
Annual savings: €20,000
Tax Incentives for Investors
Investors also benefit. Anyone investing in Spanish startups can offset up to €100,000 per year against their personal income tax.
Here’s how it works:
- Individuals: 30% of the investment can be deducted
- Companies: 50% of the investment can be deducted
- Maximum amount: €100,000 per year and per investor
Other Unique Tax Features
The Startup Law offers more benefits:
| Benefit | Startup Status | Regular Company |
|---|---|---|
| Stock options taxation | Taxed upon sale | Taxed upon grant |
| Carryforward of losses | Extended options | Standard |
| R&D deductions | Greater incentives | Standard |
| Startup costs | Fully deductible | Spread over several years |
The Beckham Rule: An Extra Boost
Here’s a real insider tip for international founders: you may also benefit from the so-called “Beckham Rule.”
This rule allows foreign nationals moving to Spain to get their first six years taxed at a flat rate of 24% on Spanish-sourced income.
Barcelona vs Madrid: Which Location Suits You Best?
Both cities offer the same legal benefits, but their environments differ substantially. Let me show you the key differences.
Barcelona: The Silicon Valley of the Mediterranean
Over recent years, Barcelona has become one of Europe’s leading tech hubs. Here are the facts:
- Startup ecosystem: Over 1,200 active startups
- Cost of living: 20–30% cheaper than Munich or Frankfurt
- Office costs: €15–25 per m² (downtown)
- Lifestyle: Mediterranean quality of life, international community
- Language: Catalan/Spanish, but English is widely spoken
Best suited for: Tech startups, e-commerce, digital marketing, gaming
Madrid: Spain’s Economic Powerhouse
Madrid shines as a financial and business center with other benefits:
- Corporate HQs: Home to most international conglomerates
- Financing: Better access to VC and banks
- Office costs: €18–30 per m² (business districts)
- Infrastructure: Excellent connections (airport, high-speed rail)
- Bureaucracy: Shorter routes to authorities and ministries
Best suited for: FinTech, B2B services, consulting, international expansion
Direct Comparison of Key Factors
| Factor | Barcelona | Madrid |
|---|---|---|
| Average office rent | €20/m² | €24/m² |
| Housing (2-bedroom apartment) | €1,200–1,800 | €1,400–2,200 |
| Startup events per year | 200+ | 150+ |
| VC funding available | Medium | High |
| International flight connections | Very good | Excellent |
| German community | Strong | Moderate |
My Recommendation
Based on my experience with clients, here’s my advice:
Choose Barcelona if you:
- Have a B2C tech startup
- Value work-life balance
- Want to be part of an international startup community
- Are cost-conscious
Choose Madrid if you:
- Are building in B2B services or FinTech
- Plan to scale and expand rapidly
- Need professional networks and capital
- Travel internationally on a regular basis
By the way: You don’t need to decide right away. Many founders start in one city and move later on, depending on their company’s development.
Step by Step: How to Make It Happen
Theory is great, but what’s the practical process? Here’s my tried-and-tested roadmap, which I’ve successfully implemented with dozens of clients.
Phase 1: Preparation (4–6 weeks)
Step 1: Check Startup Qualification
Before you get started, make sure your company meets the criteria. Create a checklist:
- Is your company less than 5 years old? ✓
- Annual revenue under €5 million? ✓
- Innovative technology or business model? ✓
- Demonstrable scaling potential? ✓
Step 2: Financial Planning
Calculate your costs and potential savings. My rule of thumb: expect €15,000–25,000 for the complete process.
Step 3: Document Preparation
Gather all required documents:
- Detailed business plan (in Spanish or English)
- 3-year financial projections
- Proof of innovation (patents, tech descriptions)
- Certificates of good conduct
- Articles of association
Phase 2: Application (6–12 weeks)
Step 4: Submit the ENISA Application
Startup recognition runs via ENISA, Spain’s innovation agency. This is crucial for all further benefits.
Step 5: Apply for the Visa in Parallel
While your ENISA application is processed, you can already apply for the Startup Visa. This saves valuable time.
Step 6: Prepare for Tax Registration
Get ready for registration with the Spanish tax office (Hacienda). It’s essential to involve a local tax advisor here.
Phase 3: Implementation (4–8 weeks)
Step 7: Establish the Company
Once you have all approvals, you can set up your Spanish company. An S.L. (Sociedad Limitada) is usually the best choice.
Step 8: Open a Business Bank Account
Once established, you can open a business bank account. I recommend banks with an international focus like BBVA or Santander.
Step 9: Tax Registration
Register with Hacienda and apply for reduced tax rates.
Schedule and Costs at a Glance
| Phase | Duration | Costs | Key Milestones |
|---|---|---|---|
| Preparation | 4–6 weeks | €3,000–5,000 | Documentation, Consulting |
| Application | 6–12 weeks | €5,000–8,000 | ENISA, Visa application |
| Implementation | 4–8 weeks | €7,000–12,000 | Company setup, Banking |
| Total | 14–26 weeks | €15,000–25,000 | Operating company |
Important: For most clients, these costs pay for themselves within the first year from tax savings alone.
Common Pitfalls—and How to Avoid Them Smoothly
In my consulting work, I see the same mistakes coming up time and again. Let me show you the most important pitfalls—and how to sidestep them.
Pitfall 1: Ambiguous Startup Definition
The Problem: Many entrepreneurs overestimate their chances of gaining startup recognition.
The Reality: ENISA checks closely for genuine innovation and scaling potential. A basic online shop doesn’t cut it.
How to avoid it:
- Emphasize the innovative elements of your business model
- Document your technology in detail
- Present concrete scaling plans
- Have your application reviewed by experts beforehand
Pitfall 2: Shell Company Without Substance
The Problem: Running just a mailbox company in Spain without real business activity.
The Reality: German and other EU tax authorities look closely. Without real economic substance, you may run into trouble.
How to avoid it:
- Relocate actual business operations to Spain
- Hire local employees
- Conduct business from within Spain
- Document all decisions and activities
Pitfall 3: Poor Tax Planning
The Problem: Underestimating the complexity of international tax planning.
A real-world example: A client wanted to transform his German GmbH into a Spanish S.L. in 2023. Without proper planning, this would have resulted in a hefty tax bill in Germany.
How to avoid it:
- Plan your relocation gradually over several years
- Make smart use of double taxation treaties
- Coordinate tax advice in both Germany and Spain
- Include all types of tax (income, corporate, trade tax)
Pitfall 4: Overestimating Bureaucratic Efficiency
The Problem: Despite digital improvements, Spanish bureaucratic processes often take longer than expected.
The Reality: Expect processing times to be 20–30% longer than officially stated.
How to avoid it:
- Build generous buffers into all scheduling
- Work with local lawyers and consultants
- Submit complete and accurate applications
- Monitor your application status regularly
Pitfall 5: Underestimating Cost of Living
The Problem: Barcelona and Madrid have become more expensive, especially for international professionals.
Realistic Budgeting:
| Cost Category | Barcelona (monthly) | Madrid (monthly) |
|---|---|---|
| Apartment (2-bed, central) | €1,500–2,000 | €1,800–2,400 |
| Office (co-working) | €200–400 | €250–450 |
| Living expenses | €800–1,200 | €900–1,300 |
| Car/Transport | €300–500 | €350–550 |
| Total | €2,800–4,100 | €3,300–4,700 |
My tip: Budget generously and visit your preferred city for at least a week in advance to get a real feel for the costs.
Spain’s Startup Law is more than just another tax-saving scheme. It’s a genuine opportunity for international founders ready to take the leap into Europe.
The combination of reduced tax rates, simplified visa processes, and a dynamic startup ecosystem makes Spain a strong alternative to Germany, Austria, or Switzerland.
But—let me be frank—it’s not for everyone.
You need a true startup with real innovation potential. You must be prepared to move real substance to Spain. And you should think mid- to long-term, not just chase a quick tax advantage.
If you tick these boxes, you can cut your tax burden by 30–50% with a well-planned relocation. For many of my clients, that translates into annual savings of €50,000–200,000.
My advice: seek professional guidance before taking your first step. Investing in thorough tax planning truly pays off.
Do you have questions about your specific situation? Get in touch—I’m happy to help. Together, we’ll find out whether Spain’s Startup Law is the right path for you.
Your RMS
Frequently Asked Questions
-
Do I have to live in Spain permanently to benefit from the advantages?
No, you don’t have to live in Spain full-time. What’s essential is that your company has real economic substance in Spain. This means business decisions should be made from Spain, and your company should have genuine activity there. -
Can I transfer my existing German company to Spain?
Yes, it‘s possible, but tax-wise it’s complex. A direct relocation can trigger an exit tax in Germany. A gradual transfer or setting up a new Spanish company is often the smarter approach. -
How long does startup recognition take?
Officially, ENISA recognition takes 3–6 months. In practice, plan for 4–8 months depending on the complexity of your case and current processing volumes. -
Which industries have the best chances of recognition?
Industries with particularly high prospects: FinTech, HealthTech, CleanTech, AI/Machine Learning, innovative E-Commerce, SaaS solutions, and Biotech. Demonstrating innovation and scalability is key. -
Can I combine Spanish tax perks with those of other EU countries?
In principle, yes—but strict anti-abuse rules apply. Popular combinations include Spain + Cyprus or Spain + Ireland. Always have such arrangements checked in advance. -
What happens after the four years of reduced tax?
After four years, the corporate tax rate rises from 15% to 25%. Many entrepreneurs then consider relocating to other EU states or restructuring their activities. It’s crucial to plan for the long term from the outset. -
Do I need a Spanish business partner?
No, you may found a Spanish company as 100% sole proprietor. However, a local partner can help with networking, market insights, and practicalities. -
How is my salary as managing director taxed?
As managing director of a Spanish company, you’re subject to Spanish income tax. The Beckham Rule may apply, setting a flat rate of 24% for your first six years. -
Is retroactive application possible?
No, startup perks apply only from the date of official recognition. That’s why you should file your application as early as possible. -
What’s the realistic all-in cost for the whole process?
Expect to spend €15,000–25,000 for consulting, applications, company formation, and setup. For most clients, these costs pay for themselves within the first year through tax savings.
