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The tax deduction for investment in newly created or recently established companies is provided for in Law 35/2006, of November 28, on Personal Income Tax, specifically in Articles 68.1 and 70 and Additional Provision 38.2.

In particular, this deduction allows for a 50% reduction in the national Personal Income Tax liability of the amounts paid during the relevant period for the subscription of shares or equity interests in newly created or recently established companies. To qualify, both the company and the taxpayer must meet a series of requirements.

I. REQUIREMENTS

1. Regarding the entity whose shares or equity interests are acquired:
   
   
   
   
   
   1. During all years of holding the equity interest, the entity in which the investment is made must be a public limited company (SA), a limited liability company (SRL), a public limited company (SAL), or a small limited liability company (SRLL), as provided for in the legislation, and must not be admitted to trading on any organized market, whether regulated as a multilateral system.
   
   
   
   2. It must carry out an economic activity and have the necessary personnel and resources for its development; that is, during the periods of holding the equity interest, the company must not be considered a holding company.
   
   
   
   3. The amount of the entity's equity cannot exceed €400,000 at the beginning of the tax period in which the taxpayer acquires the shares or equity interests. Shares, in the case of belonging to a business group, the total equity consists of the total equity of the group.
   
   
   
   




2. Taxpayer's Requirements:
   
   
   
   1. The taxpayer must acquire shares or equity interests in the entity either at the time of its incorporation or through a capital increase carried out within five years of said incorporation. In the case of certain emerging companies (as specified in Article 3.1 of Law 28/2022), they may be acquired within seven years of said incorporation. These shares or interests must remain in the taxpayer's assets for a period of more than three years and less than twelve years.
   
   
   
   2. The taxpayer's direct or indirect shareholding, together with that held in the same entity by their spouse or any person related to the taxpayer by blood or marriage, in the direct or collateral line, up to and including the second degree, may not exceed 40% of the entity's total share capital or voting rights during the holding period. In the case of a founding member, these limitations do not apply, a founding member being understood to be the one named in the notarial deed of incorporation.
   
   
   
   

II. BASIS OF THE DEDUCTION

The maximum basis for the deduction is €100,000 per year and will consist of the acquisition value of the subscribed shares, which includes, in addition to the share capital, the amount of the share premium paid (V1015/16). Amounts paid for the subscription of shares or equity interests will not form part of the basis for the deduction when the taxpayer claims a regional tax deduction for such amounts.

On the other hand, in those cases in which the taxpayer transfers and opts for the application of the reinvestment exemption in newly or recently created entities (art. 38.2 and additional provision 38ª. LIRPF and art. 41 RIRPF), only the part of the reinvestment that exceeds the total amount obtained in the transfer of those shares will form part of the base of the deduction corresponding to the new subscribed shares.

III. TAX LIABILITY DEDUCTION

The deduction generated in accordance with the provisions of the previous point may be applied to the national personal income tax liability, under the terms established in Article 68.1 of the Spanish Personal Income Tax Law (LIRPF). The applicable deduction percentage amounts to 50% of the amounts paid during the period for the subscription of shares or equity interests that meet the required conditions, with a maximum annual base of €100,000. Consequently, the maximum deduction that may reduce the national tax liability will be €50,000 per tax year, provided that the aforementioned conditions are met.

IV. ASSET VERIFICATION

The application of this deduction requires that the verified amount of the taxpayer's assets at the end of the tax period exceeds the value determined at the beginning of the period by at least the amount of the investments made. For these purposes, increases and decreases in value experienced during the tax period by assets that remain part of the taxpayer's net worth at the end of that period are not taken into account.

V. LOSS OF THE RIGHT TO THE DEDUCTION

If the right to the deduction claimed is lost due to non-compliance with the aforementioned requirements, the taxpayer will be obliged to rectify this situation. To do so, the taxpayer must add to the state tax liability accrued in the tax year in which the requirements are not met the late payment interest referred to in Article 26.6 of the General Tax Law, based on the provisions of Article 59 of the Personal Income Tax Regulations and the ruling in binding consultation V0341/23.