Spain has become one of the most popular destinations for remote working, especially when it comes to working for foreign companies. Whether it is because of the economic advantages or the flexible working hours, this modality offers many opportunities. However, in order to know how to do it properly, it is necessary to take into account a series of legal, tax and labour implications before taking the plunge.
For this very reason, in this article we analyse the main ways of working for a foreign company from Spain and the key aspects to consider.
What types of workers are eligible for remote working in Spain?
In this case, what concerns us most is the employee who has a direct relationship with the company. This is the most common scenario, where an employment relationship is established, with obligations, schedules and assigned tasks.
For example, a U.S. citizen may decide to move to Spain while maintaining their employment with a U.S. company. Alternatively, a Spanish worker may apply for a job at a U.S. company while continuing to reside in Spain.
It is also important to highlight another model: self-employed workers. In this case, individuals are responsible for their own social security contributions and tax obligations. These workers sign a commercial contract with the foreign company, specifying the conditions of service, project duration, and assigned tasks.
How can a foreign company hire employees in Spain?
There are several ways for companies to hire employees outside their home country. However, when it comes to remote work, one of the simplest and most effective solutions is the Employer of Record (EOR) model.
This approach allows a foreign company to hire employees in Spain without having to establish a legal entity in the country. It is particularly beneficial for businesses that need to enter the Spanish market quickly while avoiding the administrative burdens of setting up a company.
The EOR is responsible for fulfilling all tax and labour obligations on behalf of the foreign company. At all times he ensures that the company complies with Spanish legislation, including the registration of employees with the Social Security or compliance with collective bargaining agreements, for example.
And how can foreign companies operate?
The truth is that, thanks to the Employer of Record model, foreign companies can operate in Spain without the need to create a local entity. By using a non-resident VAT number, it is possible to hire employees and comply with Spanish tax and labour regulations without the costly and complex formalities associated with setting up a company.
The EOR takes care of social security obligations, employee withholdings and tax payments, ensuring full compliance with local legislation, and facilitating payroll management through cash handling accounts.
To better visualise this, let’s take the example of a US technology company looking to hire developers in Spain. Thanks to the Employer of Record model, it can operate in Spain without creating a legal entity. Using a non-resident VAT number, it can hire Spanish employees, comply with local tax and labour regulations, and manage payrolls without incurring the cost of setting up a company in Spain. These same workers are the ones who will use remote working to start operating.
What other formalities does the EOR take care of?
The hiring process often involves bureaucratic challenges that can be overwhelming for foreign companies. This is where an EOR becomes particularly useful. They oversee the entire employment process, including:
- Candidate selection
- Employment contracts
- Payroll management
- Tax and social security compliance
- Insurance and benefits administration
By handling these responsibilities, an EOR simplifies operations for foreign businesses and ensures full compliance with Spanish regulations without requiring the company to establish a local entity.
What if the company does not have an EOR, what must it do to contract in Spain?
If a foreign company does not use an EOR, it will need to set up a legal entity in Spain or work with an intermediary to ensure compliance with local laws. This includes:
- Registering with the Agencia Tributaria to obtain a Spanish tax identification number (CIF).
- Managing social security contributions for employees.
- Complying with Spanish labor laws, including payroll management, withholding taxes, working hours, breaks, and holidays.
Advantages of working from Spain for a foreign company
Working from Spain for a foreign company offers important benefits, such as flexible working hours and the possibility of accessing international job opportunities. For workers, the option of accessing a foreign market with more competitive salaries is also attractive. In addition, foreign companies can reduce operating costs by hiring without the need to establish a local entity in Spain.
For this reason, and so that everything happens correctly, in this series of processes, or even when it comes to rethinking it, it is important to have good advice. At LEIALTA, we have a team of experts in labour matters, who will be able to resolve all your outstanding doubts. Consult our professionals for any queries you may have.
