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V0794-22 11 April 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · deducción por inversión

Tax deduction for investment in startups requires subscription of shares or holdings, even via credit contribution in capital increases

A query was raised regarding whether investing in a startup through convertible notes or participating loans qualifies for Personal Income Tax (IRPF) deductions. The Directorate General for Taxes (DGT) ruled that financing through loans does not entitle the investor to the deduction, unless such credit is contributed as part of a capital increase.

The question raised

Whether a taxpayer of the Personal Income Tax may apply the deduction for investment in newly or recently created companies when the investment in the company is made via a convertible note or a participating loan.

The DGT's ruling

The deduction requires the subscription of shares or holdings upon incorporation or in a capital increase within the first three years. The granting of loans or other formulas that do not involve the subscription of shares does not allow for the deduction. However, if the credits held by the taxpayer against the company are contributed in a capital increase within the legal period, the investment shall be valid for the deduction.

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