Form 165 is the return filed in January by the company that certified to its shareholders the deduction for investing in newly or recently created companies. With that certificate, each investor deducts 50% of the amount subscribed in their income tax, with a maximum base of €100,000 per year (art. 68.1 of the Personal Income Tax Law (LIRPF)).
The investor applies the deduction in their Personal Income Tax (IRPF), but the formal obligation falls on the company. If the company does not meet the requirements or does not certify correctly, the investor loses the deduction and will have to repay it with interest. This guide is for the issuer: what the company must meet, what it certifies, when it files Form 165 and what changes if it issues tokenized shares.
How much can the investor deduct and with what limits
The investor deducts 50% of the amounts paid during the year to subscribe shares or holdings. The maximum base is €100,000 per year, so the maximum deduction is €50,000 per person per year (art. 68.1.1.º of the Personal Income Tax Law, LIRPF).
Three limits reduce that figure in practice:
- It only reduces the state tax liability. The deduction reduces the gross state tax liability and the result cannot be negative. The law does not provide for carrying the excess forward to subsequent years (art. 67 LIRPF).
- State or regional, not both. The amount subscribed that the investor takes to a regional deduction is excluded from the state base (art. 68.1.1.º LIRPF).
- Asset test. The investor's net worth at the end of the year must exceed that at the beginning by at least the amount invested (art. 70 LIRPF).
Law 28/2022 on the promotion of the startup ecosystem improved the deduction with effect from 1 January 2023 (final provision 3.ª of Law 28/2022).
| Item | Up to 2022 | From 2023 |
|---|---|---|
| Percentage | 30 % | 50 % |
| Maximum annual base | 60,000 € | 100,000 € |
| Window to subscribe in a capital increase | 3 years from incorporation | 5 years (7 if it is an emerging company) |
| Maximum holding of 40% | For all | It does not apply to the founders of a startup |
| Company equity | Up to €400,000 | Up to €400,000 |
What it means for you: when you present the round, do not promise savings of €50,000 to each investor. Their actual deduction depends on their state tax liability, whether they use a regional deduction, and whether the company meets the requirements over the years.
Company requirements: what you certify
The company certifies that it meets the three requirements of number 2.º of art. 68.1 in the tax period in which the investor subscribed, and the first must be maintained throughout the holding period. The table adds a fourth that the certificate does not cover, but which also depends on the company (art. 68.1.2.º, 3.º.c and 5.º LIRPF).
| Requirement | Detail | When it is measured |
|---|---|---|
| Legal form and non-admission to trading | S.A., S.L., employee-owned S.A. or employee-owned S.L., not admitted to trading on any organized market, whether regulated or a multilateral trading facility (MTF) | All years of ownership |
| Real economic activity | With human and material resources; it cannot be the management of a portfolio of securities or real estate | All fiscal years closed before the sale |
| Equity | Not exceeding €400,000; in a group, the amounts of all its companies are added together | At the beginning of the company's tax period in which the investor subscribes |
| New activity (not included in the certificate: art. 68.1.3.º.c) | A company that continues an activity previously carried out under different ownership does not qualify | At subscription |
The timing of the equity limit has consequences. It is measured at the start of the company's fiscal year, not after the round. A large capital increase does not prevent the deduction for those who subscribe that same year, but it can close it off for those in the following year if equity then exceeds €400,000. What it means for you: if you plan several rounds, review equity as of 1 January before promising the deduction in each one.
Investor requirements
- Subscribe, do not buy. Shares or holdings are acquired at incorporation or in a capital increase within the following five years, or seven if the company is an emerging company. Buying from another shareholder does not give the right to the deduction (art. 68.1.3.º.a LIRPF).
- Holding for more than three years and less than twelve (art. 68.1.3.º.a LIRPF).
- Maximum holding of 40%. Together with their spouse and relatives up to the second degree, it cannot exceed 40% of the capital or votes on any day of the holding period. It does not apply to founders of an emerging company who appear in the incorporation deed (art. 68.1.3.º.b LIRPF).
- Company certification (art. 68.1.5.º LIRPF).
If the investor breaches afterward, for example by selling before three years, they must add to their state tax liability for the year of the breach everything deducted, plus late-payment interest (art. 59 of the IRPF Regulations, RIRPF).
Example with figures: three investors in the same capital increase
A limited liability company incorporated in March 2023 closes its fiscal year on 31 December. As of 1 January 2026, its equity is €280,000. In May 2026, within five years of its incorporation, it increases capital and three individuals join. The state tax liabilities are assumptions of the example.
| Investor | Subscribes | Deduction base | 50% of the base | Gross state tax liability (hypothetical) | Deduction applicable in 2026 |
|---|---|---|---|---|---|
| A | 20,000 € | 20,000 € | 10,000 € | 12,000 € | 10,000 € |
| B | 150,000 € | 100,000 € | 50,000 € | 31,000 € | €31,000 (€19,000 lost) |
| C | 60,000 € | 0 € | 0 € | Irrelevant | €0: with their spouse they exceed 40% |
Investor B subscribes €150,000, but the base is capped at 100,000. In addition, their state tax liability only allows €31,000 of deduction and the rest does not carry forward. Investor C is excluded because, with their spouse, they exceed 40% of the capital. If the company were an emerging company and C appeared as a founder in the deed, that limit would not affect them.
The company issues three certificates if all three request them, even if C is not going to deduct: the certificate certifies the company's requirements, not the investor's. In January 2027 it files form 165 with one line for each certificate issued.
Form 165: who files it, when, and what it contains
It is filed by newly or recently created companies that have issued certifications to shareholders or members for the deduction under art. 68.1. If you have not issued any, there is no form 165 (art. 2 of Order HAP/2455/2013).
| Step | Who | When | Basis |
|---|---|---|---|
| Subscription at incorporation or in a capital increase | Investor and company | Year 0 | Art. 68.1.3.º LIRPF |
| Individual certificate of compliance with requirements | Company | Referring to the subscription period; as a precaution, issue it in that same year | Art. 68.1.5.º LIRPF |
| Form 165 | Company | January of year 1, for subscriptions of year 0 | Art. 69.1 RIRPF and art. 4 of Order HAP/2455/2013 |
| Deduction on the income tax return | Investor | Declaration for the year 0 | Arts. 67 and 68.1 LIRPF |
| Holding period | Investor and company | More than 3 and less than 12 years | Art. 68.1.2 and 3 LIRPF |
The content is limited. The company declares its identification details, its date of incorporation and the amount of its equity. For each acquirer, it reports the full name, NIF, amount and date of acquisition and their percentage of participation (art. 69.1 RIRPF).
Filing is electronic, at the office of the Spanish Tax Agency (AEAT) (arts. 5 and 6 of Order HAP/2455/2013). What it means for you: set a recurring task in January and keep a copy of each certificate. With form 165, the AEAT can cross-check each investor's deduction against what the company declares; if its line is missing, the investor loses that support.
If the investor sells and reinvests
The gain from selling shares or interests for which the deduction was applied is exempt if all proceeds are reinvested in another company that meets the requirements. If only part is reinvested, the exemption is proportional (art. 38.2 LIRPF). The reinvestment period is one year from the sale (art. 41.3 RIRPF).
The exemption and the deduction do not accumulate on the same money. In the new investment, only the amount exceeding the proceeds from the sale forms the deduction base (art. 68.1.4 LIRPF).
If the capital increase is made with tokenized shares
A public limited company (S.A.) can represent its shares in a distributed ledger maintained by an ERIR, the entity responsible for administering the registration and record (art. 8 of the Law 6/2023). Registering the shares in that ledger is not admitting them to trading, so by itself it does not affect the first requirement of the deduction.
Admission does affect it. If the shares start trading on an MTF, the company stops meeting the requirement and investors lose the deduction. This also applies to an MTF based on distributed ledger technology under the European pilot regime (art. 68.1.2.a LIRPF and Regulation (EU) 2022/858, which defines the DLT MTF as a multilateral trading facility). Plan any admission after your investors' minimum holding period expires, or assume the cost and say so in the round.
Two more rules condition the transaction. The interests of an S.L. are not securities, so an S.L. cannot issue tokenized interests (art. 92.2 of the Capital Companies Law); for tokenized equity you need an S.A., as explained in the guide on which companies can issue tokenized securities. And if you promote a prospectus-exempt offering with advertising, an entity authorized to provide investment services must be involved in the placement (art. 36 of Law 6/2023).
The operational advantage lies in the data. The issuance register already records the date, amount and percentage of each investor, which are the fields of the certificate and form 165. The full process is in how to issue a security token in Spain, and the other tax obligations, in the guide on issuer taxation.
Issuer checklist
- Check equity as of 1 January of the round year: no more than €400,000, adding the group if there is one.
- Confirm that the capital increase falls within five years of incorporation, or seven if you are a startup.
- Check that no investor, together with their family, exceeds 40%, except founders of an emerging company.
- Prepare an individual certificate for each investor, referring to the subscription period, and issue it in the same year.
- File form 165 in January with all certificates issued in the previous year.
- Do not admit the shares to trading on a regulated market or an MTF while your investors must hold them.
- Explain in the round documentation that the deduction depends on each investor's tax situation.
If you are raising from individual investors for the first time, also review how a business angel fits into your cap table and the steps of the capital increase.
To go further: startup certification and how to make a pitch deck.
If you need a law firm to prepare the transaction, at HokenFi's partner law firms you can request proposals from the platform.
Are you preparing a capital increase with many investors who will want to apply the 50% deduction? Take the issuance diagnosis (2 min) or request a proposal.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
Frequently asked questions
Who has to file form 165?
The newly or recently created company that has issued certificates to its shareholders for the deduction under art. 68.1 of the Personal Income Tax Law (LIRPF). The investor does not file it. If the company has not issued any certificate in the year, it does not have to file it (art. 2 of Order HAP/2455/2013).
When is form 165 filed?
In January of each year, for subscriptions of shares or interests in the previous year. A capital increase subscribed in 2026 is declared in January 2027. Filing is electronic, at the Tax Agency's office (art. 69.1 of the Personal Income Tax Regulations (RIRPF) and art. 4 of Order HAP/2455/2013).
How much can be deducted for investing in a newly created company?
50% of the amount subscribed, with a maximum base of €100,000 per year: up to €50,000 deduction. It only reduces the gross state tax liability, which cannot become negative, so no one deducts more than their state liability. It requires subscribing at incorporation or in a capital increase and holding the investment for between three and twelve years (art. 68.1 of the Personal Income Tax Law (LIRPF)).
When is a company considered newly created?
For this deduction, when the investor subscribes at incorporation or in a capital increase made in the following five years, or seven if it is an emerging company. In addition, the company must have equity of up to €400,000 at the start of that fiscal year, a real economic activity and not continue an activity previously carried out under another ownership (art. 68.1 of the Personal Income Tax Law (LIRPF)).
Can the state and regional deductions be applied at the same time?
Not on the same money. Amounts the investor applies to a regional deduction for investment in companies do not form part of the base of the state deduction (art. 68.1.1.º of the IRPF Law). Each euro subscribed can only go to one of the two, so it is advisable to calculate with the advisor which split gives the largest deduction.
What happens if I sell the shares before three years?
You lose the deduction. In the tax return for the year in which you sell, you must add to the state tax due all amounts deducted, plus late-payment interest (art. 59 of the IRPF Regulations). If you sell after three years and reinvest the proceeds in another company that meets the requirements within one year, the gain may be exempt (art. 38.2 of the IRPF Law).
