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Practical Income Manual 2023.

Requirements and conditions for your application

1. Requirements that the entity in which you invest must meet

 Regulations: Art. 68.1.2 Law Personal Income Tax

The entity whose shares or participations are acquired must meet the following requirements:

  1. Take the form of Public Limited Company, Limited Liability Company, Labor Limited Company or Labor Limited Liability Company, in the terms provided for in the consolidated text of the Capital Companies Law, approved by Royal Legislative Decree 1/2010, of July 2, and Law 44/2015, of October 14, on Labor Companies, and not being admitted to trading in any organized market , both regulated markets and multilateral trading systems.

    This requirement must be met during all years of ownership of the share or participation.

  2. Carry out an economic activity that has the personal and material means for its development.

    In particular, the activity may not be the management of movable or real estate assets referred to in article 4.8.Dos.a) of Law 19/1991, of June 6, on the Wealth Tax, in any of the tax periods of the entity concluded prior to the transfer of the participation.

  3. The amount of the entity's own funds may not exceed 400,000 euros at the beginning of the entity's tax period in which the taxpayer acquires the shares or participations.

    When the entity is part of a group of companies within the meaning of article 42 of the Commercial Code, regardless of residence and the obligation to prepare consolidated annual accounts, the amount of own funds will refer to the group of entities belonging to said group.

2. Conditions that must be met by the shares or units in which you invest

Regulations: Art. 68.1.3 Law Personal Income Tax

The following conditions must also be met:

  1. The shares or participations in the entity must be acquired by the taxpayer either at the moment of the constitution of that entity or by means of an extension of capital carried out in the following terms:

    • Generally within the five years following said constitution.

    • In the case of emerging companies referred to in section 1 of article 3 of Law 28/2022, of December 21, promoting the ecosystem of emerging companies, in the seven years following said constitution.

    In addition, they must remain in your assets for a period of more than three years and less than twelve years .

    Startups

    In accordance with section 1 of article 3 of Law 28/2022, of December 21, promoting the ecosystem of emerging companies, is understood as “emerging company” any legal entity, including technology-based companies created under Law 14/2011, of June 1, on Science, Technology and Innovation, that simultaneously meets the following conditions:

    1. Be newly created or, not being newly created ,

      • In general, when no more than five years have elapsed since the date of registration in the Commercial Registry, or competent Registry of Cooperatives, of the public deed of incorporation, or

      • in the case of companies in biotechnology, energy, industrial and other strategic sectors or that have developed their own technology, designed entirely in Spain, when seven years have not elapsed.

    2. Not having arisen from a merger, spin-off or transformation operation of companies that are not considered emerging companies. The terms concentration or segregation are considered included in the previous operations.

    3. Do not distribute or have distributed dividends , or returns in the case of cooperatives.

    4. Do not list on a regulated market.

    5. Have its registered office, registered office or permanent establishment in Spain .

    6. Have at 60 per 100 of the workforce with an employment contract in Spain . In cooperatives, working partners and labor partners, whose relationship is of a corporate nature, will be counted within the workforce, for the sole purposes of the aforementioned percentage.

    7. Develop an innovative entrepreneurship project that has a scalable business model.

    When the company belongs to a group of companies defined in article 42 of the Commercial Code, the group or each of the companies that make it up must comply with the above requirements .

    Entrepreneurs who want to benefit from the benefits and specialties of Law 28/2022 must obtain the "certification of innovative and scalable entrepreneurship of the business model" referred to in article 4 of the aforementioned law and be registered as such in the Registry. Commercial or in the competent Registry of Cooperatives.

    In relation to entrepreneurship certification, see Order PCM /825/2023, of July 20, which regulates the criteria and certification procedure for emerging companies that give access to the benefits and specialties recognized in Law 28/2022, of December 21, to promote the ecosystem of emerging companies.

  2. The direct or indirect participation of the taxpayer , together with that held in the same entity by his spouse or any person linked to the taxpayer by kinship, in a straight or collateral line, by consanguinity or affinity, up to the second degree included, cannot be, during any day of the calendar years of holding the participation, greater than 40 per 100 of the entity's share capital or its voting rights.

    Exception: This requirement will not apply to the founding partners of an emerging company referred to in Law 28/2022, of December 21, on the promotion of the ecosystem of emerging companies, understood as those that appear in the public deed of incorporation. Of the same.

  3. That they are not shares or participations in an entity through which the same activity that was previously carried out through another ownership is carried out.

3. Formal requirements

Regulations: Art. 68.1.5 Law Personal Income Tax

Compliance with these requirements must be accredited by means of a certification issued by said entity in the tax period in which the acquisition of the same occurred.

To do so, the entity that meets the requirements must present an informative statement in relation to compliance with the requirements, identification of its shareholders or participants, percentage and holding period of the participation.

Note: The obligation to submit an informative return by newly or recently created entities and the information that must be included is established in article 69.1 of the Personal Income Tax Regulations .

Likewise, in relation to this informative declaration, see Order HAP /2455/2013, of December 27, which approves model 165, “Informative declaration of individual certifications issued to partners or participants in newly or recently created entities” and determines the place, form, term and procedure for its presentation, and modifies the Order of July 27, 2001, which approves forms 043, 044, 045, 181, 182, 190, 311, 371, 345, 480, 650, 652 and 651, in euros, as well as model 777, payment or return document in the case of late and complementary declarations-settlements, and for the which establishes the obligation to necessarily use models in euros as of January 1, 2002 ( BOE of 31).