1. Mistake in the Choice of Legal Structure
The legal structure of a startup affects its taxation and general operations. In Spain, many startups choose the Sociedad Limitada (SL) for its flexibility and the protection it offers to partners. With the recent Startup Law, new companies can benefit from a reduced corporate tax rate of 15% for the first four years of profitable activity. Choosing the right structure from the start is key to optimising taxes and minimising legal complications.
2. Not Taking Advantage of Tax Benefits for R&D and New Businesses
The Spanish tax framework favours innovative startups, particularly in research and development (R&D). The Startup Law introduces benefits such as the 40% deduction on business angels’ investments and the option to defer payment of corporate income tax for the first two profitable years, without interest. These benefits can be essential for early-stage startups that are not yet generating consistent revenue. To take advantage of these incentives, planning with a specialised tax advisor is essential.
3. Confusion between Personal and Business Finances
Separating personal and business finances is crucial to avoid problems with the tax authorities. Clear accounting allows for deductions and prevents penalties. From the outset, it is recommended that startups open business-specific bank accounts and digitise their accounting. This separation is particularly important in start-ups, where founders often mix personal and business funds, which can complicate tax deductions and reporting.
4. Incorrect VAT Management and Withholding Obligations
Startups in Spain must file quarterly VAT returns (form 303) and personal income tax returns (form 111) if they have employees or freelancers. Failure to comply with these obligations may result in penalties. For startups operating in the EU, it is important to understand intra-EU VAT regulations. Automating these processes and working with an advisor helps to ensure that all requirements are met and unnecessary fines are avoided.
5. Not Properly Recording Deductible Expenses
Properly recording expenses is essential to maximising tax deductions. Business-related expenses, such as office rent, software and supplies, may be deductible. However, it is essential to have invoices and digital documentation to support each expense. Startups can benefit greatly from accounting software that facilitates this process, allowing them to keep documentation organised and comply with Spanish regulations.
6. Lack of Awareness of the Model 720 Obligation for Assets Abroad
If a startup has assets abroad, it must file the 720 model, which is mandatory in Spain to declare these assets. Failure to do so can result in serious penalties, even if the company is in its early stages. This aspect is especially relevant for technology startups or startups with international investments, and requires special attention in order to comply with the regulations and avoid tax problems in the future.
7. Misclassification of Freelancers and Remote Employees
It is common for startups to hire freelancers and remote employees, but it is important to classify them correctly. In Spain, if a worker meets certain criteria (for example, if he or she works exclusively for a company), he or she can be considered an employee for tax purposes, which implies contribution obligations. Misclassification of these workers can lead to penalties. It is advisable to review each case and, if necessary, seek specialised advice to comply with labour and tax regulations.
8. Failure to Seek Specialised Tax Advice
Startups face constantly changing tax regulations, especially in an environment as regulated as the Spanish one. The Startup Law includes many beneficial provisions, but it is easy to make mistakes if you do not have a specialised advisor. Consulting with experts allows startups to optimise their tax deductions and maximise their profits, avoiding long-term problems and helping them to grow with a solid structure.
For any startup in Spain, it is essential to avoid tax mistakes from the outset. Gutiérrez Pujadas & Partners offers tax advice designed specifically for startups, ensuring they comply with all regulations and make the most of the tax incentives available. Our team of experts will support you at every stage, from incorporation to international expansion, so you can focus on growing your business with peace of mind.