How Spanish law provides tax deductions for investment in new companies and start-ups
Published on 21st July 2025
What is required of the investee and investment under the Personal Income Tax Law to benefit from the incentive?
The Personal Income Tax Law establishes a tax advantage that, subject to requirements, allows a percentage of the capital invested in shares of companies that have been in existence for less than five years to be deducted.
This tax advantage consists of the application of a deduction of 50% of the amounts invested. This deduction is designed to encourage investment in new companies, allowing taxpayers to contribute not only capital but also their business and professional knowledge.
In order to benefit from this deduction, there are requirements that must be met both in relation to the investee and the investment itself.
Investee entity
The entity must be in the legal form of a public limited company, private limited company, worker-owned limited company or worker-owned limited liability company and must not be admitted to trading on any organised market.
Furthermore, it must carry out an economic activity with its own personal and material resources, without being engaged in the management of movable or immovable assets.
The amount of the entity's own funds cannot exceed €400,000 at the beginning of the tax period in which the shares or holdings are acquired.
The entity must have its registered office, registered office or permanent establishment in Spain.
Shareholding
The acquisition of the shares or holdings must be made at the time of incorporation of the entity or by means of a capital increase within the following five years (seven years for biotechnology, energy, industrial and other strategic sectors).
The percentage of direct or indirect shareholding (family members up to second-degree relatives) may not exceed 40% of the share capital or voting rights, except for founding partners of start-up companies as long as they appear in the public deed of incorporation of the company.
The investment must be held for a minimum of three years and a maximum of 12 years. It must not be shares or holdings in an entity through which the same activity is carried on as was previously carried on under a different ownership.
Deduction base and maximum amount
The maximum deduction base is €100,000 per year and is made up of the acquisition value of the shares or holdings subscribed. When the taxpayer transfers shares or holdings and chooses to apply the reinvestment exemption, only the part of the reinvestment that exceeds the total amount obtained in the transfer of the shares or holdings is part of the tax-credit base corresponding to the new shares or holdings subscribed.
The applicable deduction percentage will be 50% of the amounts invested. The excess of the maximum annual deduction base will not be deductible in the following years, so the maximum deduction applicable will be €50,000.
It is important to bear in mind that this deduction is a state deduction and only reduces the state tax liability. However, in the area of regional deductions, several regions offer additional incentives for investing in start-ups.
Most of the autonomous regions establish that it is not possible to apply both deductions simultaneously or clearly specify that they are not compatible, so that the amounts paid for the subscription of shares or participations will not form part of the deduction base when in respect of such amounts the taxpayer applies a deduction established by the autonomous region in the exercise of its powers. However, it would be necessary to review the regulations of the autonomous community concerned.
In order to ensure that the amounts invested with the right to make the deduction come from the income generated in the period, whether or not it is subject to personal income tax, it is required that the amount of the taxpayer's assets at the end of the tax period exceeds the value shown by the tax assessment at the beginning of the period, at least in the amount of the investments made.
Formal requirements: certificate issued by the entity
In order to take the deduction, it is necessary to obtain a certificate issued by the entity whose shares or holdings have been acquired. Entities must file an information return (Form 165) on the certificates issued, including identification details, date of incorporation, amount of equity, and details of the purchasers of the shares or units.
Osborne Clarke comment
Spanish law provides tax incentives for investment in newly created companies or start-ups. These deductions are applied directly to the investor's personal income tax liability. In other words, it is a taxpayer's right to deduct a percentage of their investment from the resulting personal income tax liability. Likewise, within the framework of the legislative powers held by the autonomous communities, they could regulate personal income tax deductions for investment in start-up companies, which must be reviewed to determine whether they are compatible with the deduction provided for in state legislation.
In addition to this tax advantage, subsequent divestment is also encouraged by declaring the capital gain obtained as exempt, provided that the amount obtained from the sale is reinvested in another new or recently created entity under the terms and with the requirements set out in article 38.2 of the Personal Income Tax Act.
