er of Spain s
“Try again. Fail again. Fail better”. The sacrifices necessary to make a startup successful are complicated enough without penalising initiative even further Once fraud has not occurred, there is no reason the debts of the company should not die with it.
Value Added Tax. Cash is always tight in a new born company so to have to give away 18% of your capital is bad enough. But then it
is, more often than not, not returned to you on the date due. There must surely be a better way for the state to operate. But if we are to continue this way, there should at least be a system of VAT management that favours the entrepreneur. There should be no requirement to prepay on invoices not yet settled and the money should be returned in shorter cycles, ideally monthly.
Dispatches from Madrid By Joe Haslam
Limited Liability. This is the reform most frequently requested. It is possible to set up a limited liability company in Spain, but the liability is limited in name only. For instance, if your company goes bankrupt, the government
can
claim against all your present and future income for unpaid social security taxes (and even take it directly from your bank account). So for many who fail with their first business that can be the end of their entrepreneurial career. This is contrary to the great entrepreneurial economies where failure is associated with learning and those who have failed have a legal framework where they can, in the words of Samuel Beckett:
Stock Options. One of the reasons that companies move to Silicon Valley is the ease and simplicity with which is it possible to set up the Stock Option plan for employees. It was one of the things that most frustrated Zaryn Dentzel, an American who came to Spain to set up the social network Tuenti (now part of Telefonica). He told the Wall Street Journal “I had to spend more than €200,000 on lawyer fees just to create our share option plan”. Spain needs a law that makes it easy to set up a plan for employees and an income tax rate that does not penalize the stock option gain so harshly (Currently 47%).
Business Angels. At the
beginning of a business, there are usually no assets so it is difficult for a bank to lend money. Spain needs a tax scheme that would allow credit to flow more smoothly for the initial investors (Business Angels, but also Friends and Family) to the entrepreneur.
This would include, at its most basic, an ability to write off failed investments against taxable income. With imagination, the law could go even further and give an exemption from capital gains tax following a trade sale once the proceeds are reinvested within 12 months in another startup. There are certainty people out there who want investment alternatives to shares or property - they just need an environment to be created at the lower level of the food chain similar to what the professional investor has.
Foreign Talent. To compete globally,
it needs to be made
easier to recruit foreign talent. Arsene Wenger, the manager of Arsenal Football Club, is well known for saying “I don’t look at the passport of people, I look at their quality and their attitude”. Spain´s Entrepreneurs should not be in the position of Zaryn Dentzel, the Tuenti CEO, who last June tweeted “Sending two amazing croatian coders back home bc spain won’t approve their work visas”. Something imaginative like the “Beckham Law”, whereby talented expatriates relocating to Spain would only be taxed on their Spanish income, is needed for work visas. And not just to allow founders to come but line employees as well.
Licences. According to the Doing Business rankings published by the World Bank, Spain comes a miserable 147th out of 183 states listed for Starting a Business. Zimbabwe is higher, as is Syria. The issue dragging her down is the
requirement for municipal
licences for even the smallest thing. Admittedly this is a growing problem in most countries but in Spain a call from the Town Hall is rarely good news. Health and Safety is one thing but it has grown out of proportion. Many of the inspectors have their jobs for
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