Find out what the criteria of the Directorate General of Taxes are

We often receive inquiries at our office related to the taxation of salaries earned through teleworking performed from Spain for foreign companies.

A recent Binding Ruling from the Directorate General of Taxes, V0194/2021, sheds light on this issue and concludes that, for tax purposes, "remote" work carried out from the employee's home in Spain is considered to be effectively performed in our country, even though the results of said work are reverted to and exploited by a foreign company.

This criterion is set out in paragraph 1 of the Commentary on Article 15 of the OECD Model Tax Convention, which establishes that, for tax purposes, "remote" work is considered to be performed in the place where the employee is physically present when carrying out the activities for which the income is paid. Similarly, if, as in the case presented in the binding ruling, the employee receives employment income, on the one hand, for work performed in the country where the company is domiciled and, on the other hand, for work performed "remotely" in Spain, it would be necessary to differentiate between these two situations to determine which jurisdiction has the right to tax such income.

Thus, in relation to "remote" work from Spain, we must distinguish whether the taxpayer is a tax resident in Spain or abroad:

• If the teleworker is considered a tax resident in Spain, their worldwide income will be taxed in our territory, so they must include, in their Income Tax Return, the salaries resulting from their work for the foreign company.

• If, however, you are considered a non-resident for tax purposes in Spain, the Non-Resident Income Tax Law states that employment income is subject to tax when it derives, directly or indirectly, from personal activity carried out in Spanish territory. Therefore, the salary received for remote work from Spain should be declared in the Non-Resident Income Tax return and, in that case, would be subject to double taxation.

It should be noted, however, that above internal tax regulations are the Double Taxation Conventions that Spain has signed with numerous countries, which can exempt the aforementioned taxation if certain conditions are met and which, otherwise, provide measures to avoid double taxation.

Therefore, we recommend a case-by-case analysis considering the specific circumstances. Our firm offers international tax advisory services.

Contact us, we'd be happy to help.

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Marc Ivars Iglesias

Sotsgeneral director at Àmbit Assessor

A graduate in Law and with a Master's degree in Tax and Financial Management from the University of Barcelona, ​​he also holds a Postgraduate Diploma in New Technologies Law from ESADE. He specializes in tax and corporate law.
Before joining Àmbit Assessor as manager in 1999, he worked as head of the Tax and Accounting department at the Busquets Terradellas law firm.
For years, he combined his work with teaching, serving as a professor of Public Finance and Tax Law at the Open University of Catalonia.

Latest posts by Marc Ivars Iglesias (see all)

• Legal Improvements to the special tax regime applicable to workers posted to Spanish territory. Beckham Law - January 9, 2023
• Obligation to implement an ethics hotline for companies with more than 50 employees. - November 17, 2022
• Taxation of teleworking for non-resident companies in Spain - May 11, 2021