REMOTE working has increased considerably during the COVID-19 crisis.
Aided by new technology, it is presented as a good way to reduce the costs of renting offices for companies and for employees to better utilize their time.
Like any trending change in our economy, it is highly recommended to analyze what the tax consequences could be.
The Spanish tax authority (Hacienda) has very specific rules on the withholding of tax on account of the Personal Income Tax (IRPF) of its employees by a non-resident company in Spain.
Very much depends on whether the company has any economic activity in Spain.
In reference to income paid to a worker, who is a tax resident in Spain, but who ‘teleworks’ from home the rules vary.
If the hiring company is domiciled in any country with a Double Tax Treaty to avoid double taxation signed with Spain, and it does not carry out any activity in Spain nor does it have a branch, agency or other type of permanent establishment in Spain, Hacienda concludes the following.
Income from remote work, even if the benefits are for a foreign company, should only be taxed in Spain.
Furthermore, as long as the company does not have an office and does not have any economic activity in Spain, it will not be obliged to withhold tax.
However, there would be two cases in which the foreign company would be obliged to make withholdings on income paid to homeworkers.
If the company has a permanent establishment in Spain; or trades in Spain in some way.
It is important to note that it is not always easy to define ‘a permanent establishment’ in Spain. For this reason it is important to determine the tax consequences of the type of work home employees will be doing and for who? Then you can avoid a huge hefty tax bill or fine in the future.
If you need advice in English for your personal and business affairs please contact Jose Oltra directly .
If you need legal assistance in English please visit www.swanpartners.es. For information specifically relating to expat services please see www.martinhayes.es
SWAN Partners C/ Pizarro, nº 1, 4º-15ª. 46004 Valencia (Spain) + 34 96 334 89 83
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