Barcelona gains international appeal with the new 'startups' law

The race to attract talent is played on an international scale and is not won solely by offering a good quality of life and long days to enjoy the sun and the beach. There are many other factors that determine the decision of a qualified professional when considering where they want to develop their professional career or invest. Barcelona has positioned itself in recent years as a winning city in the league of attracting international talent, but its potential has not been maximized as a consequence of some burdens, such as excessive bureaucracy, the lack of educational offerings in English, or an unfavorable tax system for so-called impatriates.

Reducing or eliminating these barriers is one of the main objectives pursued by the Barcelona Global association, convinced that the Catalan capital has a real opportunity to become one of the main cities in the world for talent and the new economy. After launching, together with the City Council, the Barcelona International Welcome Desk to streamline procedures for newcomers, the entity has now focused on decisively influencing the articles of the new Emerging Companies Law, better known as the Startups Law, which is expected to be approved this Thursday, November 3, in the Congress of Deputies.

The president of Barcelona Global, Maite Barrera, assures that the entity is, by far, the one that has worked most thoroughly to achieve a good startups law, although she warns that it is only a starting point and that there is still a long way to go. "Many will claim credit today, but Barcelona Global is the one most involved in this new Startups Law, on which we have been working for more than five years," says Barrera. According to the founder of Bluecap, a total of 38 lawyers belonging to 14 large firms associated with the entity have invested hundreds of hours to contribute to the drafting of the startups law and ensure that the new regulations effectively improve taxation, reduce bureaucracy, and allow a new impulse to be given to the entrepreneurial ecosystem and the attraction of talent.

In Barrera's opinion, although the regulation represents an improvement for all of Spain, it will especially benefit Barcelona, as the city will be able to "better capitalize" on the introduced changes, considering that it is currently already considered the third favorite city in Europe for creating a startup and ranks seventh in the European ranking for investment in technology companies. Furthermore, some of Spain's main unicorns have been born in Barcelona, such as Glovo, Wallbox, Travelperk, and Factorial, which join successes like those starring Fractus, eDreams, or Privalia. According to Barcelona Global, the new law will also consolidate and multiply Barcelona's leadership in attracting digital hubs of large corporations such as Nestlé, Pepsico, HP, Amazon, Sanofi, Zurich, or Roche.

This lobbying work to improve the taxation associated with talent has involved the participation of Cuatrecasas, Deloitte, EY, Garrigues, Gómez-Acebo, KPMG, Martínez-Comín, Osborne Clarke, Optio, Pérez-Llorca, PWC, Roca Junyent, Toda & Nel·lo, Uría Menéndez, and Mercer, who have had the technical support of Cristina Valiñani, project director of Barcelona Global. "We started this task in 2017, under the presidency of Gonzalo Rodés, and since then we have held 34 high-level meetings with government and political officials," says Barrera. In the amendment period, she adds, the collaboration of PDeCat and especially deputy Ferran Bel has been key.

In this process to influence the new Startups Law, 57 founders of scale-ups, nine investors, 65 companies, 150 members of the Barcelona Global International Council, and 2,500 impatriates or barcelonians by choice, as the entity's general director, Mateu Hernández, calls them, have also participated.

But, what are Barcelona Global's contributions and the main novelties that the Startups Law establishes? According to Barrera, the lobbying activity has focused on five areas: improvement of taxation associated with both the arrival and return of talent to Spain; improvement of taxation for investors in innovative companies; creation of a legal framework that allows incentivizing stock options as a remuneration formula and talent retention; simplification of procedures associated with work visas and residence permits; and a clear improvement in the process of obtaining and processing the NIE, the great headache suffered by international talent arriving in Spain.

According to Barcelona Global, these changes represent "important advances that should be celebrated," but they are not definitive and work will have to continue in the future. "Barcelona will now be able to maximize its well-known positive factors, having reduced the barrier of taxation misaligned with surrounding countries," highlights the association. In their opinion, one of the law's strengths is that it will allow attracting scaling experts, that is, those who grow startups, one of the current deficits of the ecosystem. "Accessing this knowledge and attracting successful entrepreneurs from other countries is essential for Barcelona to become a hub generating unicorns," they point out.

Other advantages of the law beneficial for Barcelona are that it enables the attraction of investors with greater financial muscle; that it generates greater competition among startups thanks to stock option plans; and that it defines a framework that incentivizes the creation of spin-offs and university-company knowledge transfer. Likewise, the association assures that thanks to the new regulation, "Barcelona will consolidate itself as one of the main destinations for digital nomads in Europe."

Thanks to the new regulation, Barcelona will consolidate itself as one of the main destinations for digital nomads in Europe

• New fiscal framework for independent professionals and their families.
  • For the first time, investors and independent professionals will be able to benefit from the impatriate regime, under which they pay 24% income tax for 5 years and are exempt from wealth tax. To benefit from this measure, these self-employed professionals must obtain at least 40% of their billing from work provided to startups or knowledge economy activities. Until now, only employed individuals could benefit from the Beckham Law.
  • Partners and family members of impatriates can also benefit from this regime.
  • The required years of absence from Spain to return and benefit from the impatriate regime are reduced from 10 to 5, which will facilitate the return of highly qualified professionals who went to other countries to study or work.
• Vuelven las stock options para remunerar al talento.
  • Las stock options estaban ahora muy penalizadas por el sistema fiscal español al tributar las acciones sobre el valor actual y considerarse su valor íntegro como renta del trabajo.
  • As of January 2023, this model changes, and stock options will be taxed when they are exercised, that is, when the shares are sold ---with a temporary limit of ten years---, which will allow emerging companies to have a remunerative tool that does not involve disbursements in the present, but is based on the promise of future growth.
• Greater ease in obtaining the NIE.
  • Qualified international professionals who come to Spain to work, undertake, research, create, study, teach, or invest will find it easier to obtain the Foreigner Identification Number (NIE) and, consequently, will be able to register more quickly with Social Security, sign an employment contract, or open a bank account.
  • The law allows a period of 6 months to obtain the NIE instead of the current 3, which allows companies and research centers to expedite hiring.
• International students who enroll in higher education institutions will also have greater facilities to access a work permit for two years.
  • Those who choose to stay to work, undertake, or research will have a guaranteed work permit for two years after completing their studies.
• Improved taxation for funds and investors.
  • It will be possible to attract better and larger funds specialized in investing in startups, as their managing partners will have more favorable taxation for the gains obtained by the investee companies and also for the profits they achieve from the management of these funds.
  • Until now, the so-called carried interest (the part that the manager keeps from the profitability of operations) was taxed at 100% and will now be taxed at 50%.
• Legal framework for digital nomads.
  • The new law allows employees of companies outside Spain to work from here and to access a work permit as highly qualified professionals for a period of three years.
  • This regulation will allow many professionals who currently work from here for the whole world to emerge.
• Administrative silence for the consideration of an emerging company.
  • The National Innovation Company (ENISA) is responsible for granting formal accreditation of innovative entrepreneurship. That is, for a startup to benefit from this new legal framework, it must first obtain a favorable report from ENISA. If after three months this certificate has not yet been issued, it will be considered granted by administrative silence.
  • To be considered emerging or a startup, the company must be less than five years old and its turnover cannot exceed 10 million euros.