The new Startups Act is encouraging expats to become entrepreneurs or investors in the country
In December 2022, the Spanish parliament gave its final approval to the novel Startup Act and the Digital Nomad Visa that falls under this act. The Legal 500 reports that the Spanish Secretary of State for Digitization and Artificial Intelligence, Carme Artigas, said that the act should be enacted by the end of January 2023.
What exactly is this act? Spain is trying to transform itself into a technological hub. The Southern European country is known for its agricultural and touristic sectors, but it is also trying to diversify its economy. In late 2021, at the height of the pandemic, the head of the International Labour Organization in Spain, Joaquín Nieto, gave an interview to the magazine Hosteltur in which he said that the fragility of the tourism industry under Covid highlighted the importance of economic diversification for the country.
Barcelona has become a dynamic hub for entrepreneurship in recent years. It ranked 3rd in Europe in the 2022 Startup Heatmap Report. EU-Startups describes the Catalonian city as a hotspot for early-stage startups and “unicorns,” that is, privately-owned startups worth over a billion dollars. The Spanish government's Startup Act clearly wants to accelerate this trend.
The Startup Act offers significant fiscal advantages to new businesses. As the legal firm Balcell summarizes, young companies will receive a corporate tax deduction of 15-25% over 4 years and be allowed to defer their tax debt for 2 years. The Barcelona-based business school ESADE says that investors in early-stage startups will now also benefit from 30-50% income tax deductions for the risk they are taking.
Bureaucratic red tape, for which Spain is notorious, will be reduced for entrepreneurs. For one, as the immigration firm Newland Chase says, startup residence authorizations will be approved a mere 10 days after application, provided that the project has been approved by the state agency for startups (ENISA).
In Spain, any expat can launch a business as long as they are a legal resident – even if not a permanent resident. If you are still outside of Spain, you may apply for an Entrepreneur Visa. You just need to submit a realistic business plan that's aligned with the country's welfare. Like the law firm Balcells says, you can show how your business will create jobs for Spaniards or use high-end technology.
The government's high commission for entrepreneurship also says that the residence visas of expat entrepreneurs and investors will also now be valid for 3 years instead of one. They will no longer have to go through the bureaucratic hassle of renewing it after only a year. Obtaining a Foreigner Identity Number (NIE) will also be made procedurally easier for those who apply in the framework of the Startup Act.
The Digital Nomad Visa will keep attracting younger remote workers and freelancers to Spain
Of course, one of the most exciting aspects of the Startup Act is the new Digital Nomad Visa. As various Southern European countries, from Greece to Portugal to Malta, launch these hugely popular visas, Spain doesn't want to lag behind. Obviously, the Spanish Digital Nomad Visa is mostly aimed at expats from beyond the European Union and European Economic Area who do not enjoy the privilege of moving around freely in Spain.
This Digital Nomad Visa will give expats the right to live and work in Spain for 5 years. It will initially be granted for 1 year, after which it can be renewed 4 times. While it can't be renewed for a 6th year, by that time expats will be eligible to apply for permanent residency if they wish to. Their spouses and dependent children can also accompany them on the same visa.
To be eligible for this visa, expats must earn twice the Spanish minimum wage, that is, at least 2,100 euros (around 2,300 US dollars) per month. They must earn at least 80% of this income from overseas, either as remote employees of non-Spanish companies or as freelancers with clients abroad. They can earn only 20% of their income from Spanish sources, and this will ensure that they do not compete with Spanish workers, including Spanish freelancers. They must also have been working remotely for at least 1 year as proof that they are used to this way of working.
An interesting result of the boom in digital nomadism since Covid is that expat populations are getting younger. The report “Burned Out Overseas – The State of Expat Life 2022” by the American insurance company Cigna shows that an astounding 71% of expats are now younger than 35. In contrast, older expats over 50 and 60 are returning home. This isn't limited to Spain; it's been a global trend since at least 2015. As reported by the British advisory Forth Capital, NatWest Bank found through a survey that a third of British retirees abroad are planning to return to the UK. That must surely include the many retired British expats in Spain.
Meanwhile, new developments like the Digital Nomad Visa are likely to increase the number of working-age expats moving to Spain. As early as 2013, the property group VIVA, which sells houses to expats on the sunny Costa del Sol of southern Spain, was reporting that foreign home-buyers were getting increasingly younger. This new Digital Nomad Visa is likely to attract Millennials and Gen Z workers who are tech-savvy digital natives, who often do jobs compatible with remote work like programming and graphic design, and who are either childless or have young children who can accompany them as dependents on the visa.
Spain is offering many buffers against the global cost-of-living crisis
Another attractive point of moving to Spain in 2023 is the strong buffers in place to help residents, including expats, cope with the cost-of-living crisis plaguing the whole world since Covid and the Ukraine war. Indeed, Spain currently boasts of the lowest inflation rate of the entire European Union (5.8% in December 2022) and has many temporary social welfare policies in place to help people live well.
The Spanish government has decided to maintain the cap of 2% on rent increases throughout 2023. This can offer a great sense of financial security to expats from countries where rent is increasing erratically and without any control. There's also a cap on the price of electricity until May, but as reported by The Local, the Spanish Ecology Minister Teresa Ribera says it might be possibly extended until 2024. Staple foods like bread, milk, cheese, fruits and vegetables are tax-free currently and will remain foreseeably so throughout the year.
Long-distance buses within a concession network are completely free in 2023. This concession network includes, among others, traveling between Madrid and Jaén (a city in the southernmost province of Andalusia) and between Teruel (in Aragon) and Barcelona. Multi-trip tickets on trains operated by the state-owned Renfe will also be free for medium-distance journeys of less than 300 km. Renfe has stated on its website that this will also reduce Spain's carbon emissions and help the country meet its climate goals by encouraging more people to take public transport.
There's also a growing trend of expats moving to medium-sized Spanish cities, small towns, or even villages rather than well-known metropolises like Barcelona and Madrid. This also allows many expats to have a lower cost of living. The city of Valencia on the warm southeastern coast, with a population of around 800,000, is currently a favorite of expats moving to Spain. As the rental company, Housing Anywhere, says, renting a comfortable apartment costs only around €786 there, while all other expenses amount to about €600 per month.
The real estate news website Idealista News reported in mid-2022 that an increasing number of expats have been buying houses in southern Spanish towns and villages with less than 5000 residents. For instance, the village of La Viñuela and the town of Ojén in Andalusia are particularly popular with expat real-estate purchasers right now. The combination of social welfare allowances that apply to all residents, affordable cost-of-living in smaller cities/towns/villages, innovative programs like the Startup Act, and efforts to reduce the notorious Spanish bureaucracy are all factors making immigration to Spain in 2023 an exciting life project.
