According to the Ministry of Labor and Social Economy’s April 2023 report, 3,335,194 people were self-employed in Spain at that time. That was a fairly long wait after the release of the last public report with such comprehensive official data—in December 2019, the Barometer of Entrepreneurship in Spain, one of the most complete such reports, showed that between 2006 and 2007, the highest levels of entrepreneurship were recorded, with 7.6% of the population engaged in entrepreneurial projects. Though that figure fell to 4.3% in 2010, the trend in the entrepreneurial activity rate (EAR) has risen in recent years.

To ensure Spain’s business performance continues to improve, along with the overall economy and GDP, it’s important the growth in entrepreneurship is sustained. With the main goal of facilitating entrepreneurship in Spain, and additional aims such as fine-tuning the business climate and fostering business unity, the Spanish legislature passed Law 18/2022, also known as the Create and Grow Law (“Ley Crea y Crece”).

What’s in this article?

• What is the Create and Grow Law?
  
• What are the objectives of the Create and Grow Law?
  
• What measures are included in the Create and Grow Law?
  
• When does the Create and Grow Law come into force?
  
• How does the Create and Grow Law affect electronic invoicing?
  

What is the Create and Grow Law?

The Create and Grow Law, officially known as “Law 18/2022 of 28 September on the creation and growth of businesses,” is a set of rules approved by the government to improve the country’s business environment, with a particular focus on small and medium-sized enterprises (SMEs).

It is a legal reform implemented within the framework of the Recovery, Transformation, and Resilience Plan, aiming to shape a more sustainable future. In this context, business and small and medium-sized enterprises play a key role. Recognizing its importance, most of the Congress of Deputies supported a law that was only a preliminary draft in June 2022 and received final approval two and a half months later.

What are the objectives of the Create and Grow Law?

The Create and Grow Law was passed with several objectives in mind:

• Facilitate the process of starting a business
  
• Reduce the default rate of Spanish businesses
  
• Provide better financing solutions for SMEs
  
• Improve the competitiveness of businesses, thereby increasing productivity
  
• Boost the country’s economic growth
  
• Enhance the digitalization of Spanish businesses. According to data from the Official College of Telecommunications Engineers, 75% of the country’s SMEs have a low or very low degree of digitization compared with the European average.
  
• Stimulate the creation of stable jobs
  
• Internationalize employment
  

What measures are included in the Create and Grow Law?

The measures included in the Create and Grow Law to achieve its goals are:

• Reduced costs for creating a business: Before the establishment of the Create and Grow Law, the legal minimum share capital required for the creation of a limited liability company (SL, “sociedad limitada”) was €3,000. The reform has significantly reduced this amount to €1. However, the minimum share capital for a joint-stock company (SA, “sociedad anónima”) remains €60,000.
  
• Simplified administrative process for setting up a business: You can now incorporate a business through the Information Center and Network for Business Creation (CIRCE). These first two measures are closely linked; simplifying the administrative process significantly reduces the costs associated with registration and notarization. And by reducing the time needed for these administrative processes, it is much quicker to set up a business.
  
• Legislative changes:
  
  • Law 20/2013 on the guarantee of market unity: This reform aims to increase trust between public administrations. In this way, the Create and Grow Law aims to encourage these entities to work together whenever necessary. It also strengthens the capacity of service desks for commercial entities to process claims.
    
  • Law 12/2012 on trade liberalization measures: Before the changes introduced by the Create and Grow Law, few economic activities did not require a license. After the implementation of the reform, the list has been extended to include any activity that is considered “harmless.” For an activity to be considered “harmless,” at least one Spanish autonomous community must declare it does not pose a risk to health or the environment.
    
  • Royal Decree Law 1/2010 on Capital Companies and Law 3/2004 on Delinquency: Both laws impose a requirement on large businesses—defined as those with annual transactions exceeding €6,010,121.04—to include specific data sets in their annual reports. Specifically, the information required includes the average time taken to pay invoices to suppliers or, alternatively, the number of invoices paid in less than the maximum time allowed by legislation.
    
• Integration of crowdfunding to European Union (EU) standards: Before the introduction of the Create and Grow Law, crowdfunding was regulated in a way that prevented specialized platforms from operating in Spanish territory. After the law was brought in line with European standards, crowdfunding services have gained greater flexibility, letting them offer their services to Spanish startups.
  
• Investments in businesses: The Create and Grow Law gives investors an extra layer of protection. They also now have mechanisms that let them form groups, which reduces negotiation costs. Previously, only €2 million could be invested in each project, but the Create and Grow Law raises this limit to €5 million. Small investors can invest a maximum of €1,000 or 5% of their assets (excluding pension funds and real estate) in each project. After the legislative reform, more commercial businesses are now authorized to engage in venture capital investments. Lastly, collective investment funds regulated by Law 35/2003 are no longer obligated to prepare quarterly reports.
  
• Sanctions for late payment: Law 3/2004 aimed to minimize late payments as much as possible. However, after determining the penalties for late payment in this law were not sufficiently dissuasive, the government reformed it through the Create and Grow Law. This reform introduces more serious consequences for businesses, in which late payments now result in restrictions on subsidies from public bodies. So they will not be able to benefit from these subsidies and will be unable to manage them as collaborating entities.
  
• Creation of the State Observatory on Private Delinquency: The State Observatory on Private Delinquency was established one and a half years after the approval of the Create and Grow Law, which outlined its creation. One of the observatory’s tasks is to publish the names of defaulting businesses annually, provided they meet all of these conditions:
  
  • The business is a legal entity.
    
  • The business does not pay on time.
    
  • The business fails to pay more than 5%.
    
  • The business has total defaults of more than €600,000.
    
• Financing with debt funds: To avoid a complicated debtor scenario for some businesses and let them continue to grow despite their total default, they can seek financing from debt funds (i.e., without the involvement of financial institutions).
  
• Mandatory electronic invoicing: Self-employed individuals and businesses, under the Create and Grow Law and in accordance with the requirements for electronic invoicing (e-invoicing) set by the EU, must send electronic invoices (e-invoices) to their clients. It’s important to note that the percentage of nonpayments rose by 0.2 points to 5% from 2021 to 2022, according to data from the Plataforma Multisectorial contra la Morosidad (Multisectorial Platform against Late Payments). However, the digitalization introduced by the legislative reform is expected to eventually result in a decrease in these figures. To minimize customer defaults in your business, using a payment platform such as Stripe Payments can be beneficial. In fact, 87% of Stripe invoices are paid within the first 24 hours.
  

When does the Create and Grow Law come into force?

Law 18/2022 came into effect October 19, 2022, 20 days after its publication in the Official State Gazette (BOE). However, the implementation of some of its measures, such as the e-invoicing requirements, took longer.

In March 2023, a public consultation was launched that lasted for 15 days and concluded March 22. It was not until June 15, 2023, that the draft Royal Decree was published, which specified that the implementation dates would be determined by a future royal decree law. On January 10, 2024, it was definitively approved by the Congress of Deputies.

Though the Create and Grow Law took effect in the fourth quarter of 2022, autonomous regions have until November 30, 2025, to completely adapt their systems to e-invoicing. Starting in 2024, any business with a turnover exceeding €8,000,000 is required to issue invoices electronically, while all other commercial businesses and self-employed individuals will be obligated to do so starting in 2025.

How does the Create and Grow Law affect electronic invoicing?

Though all of the above measures might affect many professionals and entrepreneurs, the e-invoicing requirements will be the most significant change for many businesses in Spain. Here’s how the Create and Grow Law affects e-invoicing:

• The business issuing the invoice and the business receiving it must indicate the status of the invoice: issued, received, paid, or overdue.
  
• All e-invoices, though they do not share the characteristics of traditional physical invoices, must adhere to invoicing requirements, including specific requirements for certain cases (which can be found in Royal Decree 1619/2012) as well as the breakdown and calculation of value-added tax (VAT). To ensure you consistently apply the correct tax rate, it’s worth using a tax automation tool such as Stripe Tax. Tax is regularly updated with the latest tax regulatory changes in over 50 countries where it is available (you can check the updated list of excluded territories).
  
• The billing software or solution must be able to connect and interoperate with other services developed by different vendors at no additional cost. In other words, the business that developed the program must ensure it can connect to other software tools to exchange information in both directions.
  
• Anyone receiving an electronic bill should be able to request a copy at no extra cost. This should be provided free for four years from the date of issue of the invoice. Conversely, e-invoice recipients should not have the right to dictate which invoicing solutions issuers must use.
  
• Businesses can choose their software, provided the selected solution complies with the requirements set forth by the Create and Grow Law and the Anti-Fraud Law.
  
• If an individual requests or agrees to receive e-invoices from a business, the business is required to issue them electronically. Though this requirement applies to businesses of all sizes, regardless of transaction volume or number of employees, three types of businesses are exempt:
  
  • Retail businesses
    
  • Travel agencies
    
  • Trading businesses
    
• If your business belongs to one of these sectors, you are required to issue e-invoices only for services contracted or products sold online. Conversely, the Create and Grow Law states that the list of businesses required to issue e-invoices might be expanded if there are commercial businesses that frequently communicate with their customers online, provided the volume of invoices issued is significant.
  
• Regardless of the e-invoicing solution chosen, it must provide the necessary tools to manage e-invoices, and access to these invoices must be free. The important functions required by the law are:
  
  • Reading
    
  • Copying
    
  • Downloading
    
  • Printing
    
• If users no longer wish to receive e-invoices, the contracted solution must make it easy and intuitive to revoke permission, and it must be provided at no cost.
  
• Revocation of consent to receive e-invoices should not result in the loss of the right to access past invoices. In addition, the termination of a contractual relationship does not mean that invoices issued during the contract period cannot be accessed.
  
• The Create and Grow Law imposes severe penalties on any business that does not let its customers receive e-invoices or that prevents former customers from accessing past invoices. In some cases, failure to comply with the law can result in a citation. However, if the violation is more severe, according to Law 6/2020, the fine can amount to €10,000.
  

In summary, the Create and Grow Law marks a significant turning point, particularly for Spanish SMEs and freelancers—and it can benefit you. We hope the information in this article has helped you understand the key aspects of this important reform.