Paid by a foreign employer while living in Spain

Terms used

• Beckham — The Beckham law is Spain's special tax regime for some newcomers who move to Spain for work.
• IRPF — The IRPF is Spain's personal income tax, charged on your worldwide income if you are a Spanish tax resident.
• Modelo 100 — The Modelo 100 is the annual IRPF return form.
• Beckham regime — The Beckham regime is a special tax regime for qualifying new arrivals, taxing them as non-residents on Spanish income at a flat rate.
• Modelo 720 — The Modelo 720 is a declaration of foreign assets above a set threshold.
• A1 certificate — The A1 certificate proves that you stay in your home country's social security system while posted abroad.

Key rules

• Withholding: A foreign employer with no Spanish presence usually withholds nothing, so the declaring is on you.
• Tax residence: Spanish residence applies to the whole calendar year, with no splitting of the year.
• Foreign tax credit: Keep proof of tax paid abroad, because you need it to claim the credit.
• Quarterly payments: Employees make no quarterly payments on foreign salary.

What you owe

If you are a Spanish tax resident, you owe Spanish IRPF on your foreign-paid salary. A foreign employer with no presence in Spain usually does not withhold anything. So you declare the salary and pay all the tax yourself in the annual return.

Residence is decided for the whole calendar year. You are resident if you spend more than 183 days in Spain in the year, or if your main centre of economic interests is in Spain. There is no splitting of the year. Income earned before you arrived can count too, subject to treaty rules and credit for foreign tax.

How to declare it

Put the salary in your annual return, the Modelo 100, as employment income. Convert it to euros first. The campaign usually runs from April to 30 June, but dates change each year, so check the current ones.

Employees do not make quarterly payments. That only applies if you are self-employed.

Splitting the payment

You can split the tax due on your return into two instalments: 60% at filing and 40% by early November. Paying by direct debit has an earlier deadline.

Avoiding double tax

Your employer's country may also tax the salary. Two things protect you:

• The tax treaty. Under the usual treaty rule, pay is taxed where you live unless you physically do the work in the other country. Even then, it stays taxable only in your country of residence if all three of these apply: you are in the other country for 183 days or fewer, your employer is not resident there, and the pay is not borne by a permanent establishment there. If both countries count you as resident, the treaty uses tie-breakers in this order: permanent home, centre of vital interests, habitual abode, nationality. Every treaty has its own wording, so read the one between Spain and your employer's country.
• The foreign tax credit. You can deduct the lower of two amounts: the tax you actually paid abroad on this income, or the Spanish tax attributable to it. Keep proof of the foreign payment. Credit you cannot use in one year can be carried forward four years. It does not cover foreign tax you could have had refunded under a treaty.

If you worked physically abroad, a partial tax-free exemption may apply, with conditions and a cap. Ask a tax adviser before relying on it.

Special regime for new arrivals

The Beckham regime lets qualifying arrivals be taxed as non-residents on Spanish income at a flat rate for the arrival year and five years after. You must not have been resident in Spain in the previous five years. You must apply within six months of registering for Social Security.

Social Security is separate

Income tax and Social Security are different systems. Normally you pay Social Security where you physically work. Working in Spain for a foreign employer usually means Spanish Social Security, which may require you or the employer to register.

An exception exists for postings of up to 24 months within the EU, covered by an A1 certificate from your home country. If you work in several countries and 25% or more of your work is in Spain, Spanish rules apply. For non-EU countries, a bilateral agreement may allow a limited posting exemption, often five years. Without one, Spanish contributions are due. Confirm your case with Spanish Social Security (TGSS).

Foreign accounts

Your salary is not reported under Modelo 720 as such. But a foreign account that receives it may need reporting if your foreign assets pass the threshold.

Use the checklist, documents list and timeline below to work through these steps in order.

Choosing between options

Who pays the tax on your foreign salary in Spain?

• You pay it yourself: Your employer has no office or presence in Spain, so no tax is withheld and you pay all of it in your annual return.

• Your employer withholds it: Your employer has an office or permanent establishment in Spain, or runs Spanish payroll through a local company or employer-of-record.

• Another country has the first right to tax: A treaty says the work was done there or you are resident there too. Claim relief for the foreign tax in your Spanish return.

Check whether your employer has a presence in Spain. If not, you self-assess; the treaty then decides which country taxes first.

Spanish payroll, foreign payroll and equity pay: who withholds what

Only a Spanish payroll withholds tax from your pay. With foreign payroll, and with many equity events, nothing is withheld in Spain, so you declare the income and pay the tax yourself in your annual return.

The three setups side by side

Spanish payroll

Your pay arrives with tax already taken off. Your payer sends the tax office a quarterly return and a yearly summary with your name on it. You still file the annual income tax return (IRPF), but most of the tax is already paid.

A foreign company has to run Spanish payroll if it has an office or other fixed presence in Spain. The same applies if it is considered to operate in Spain because it pays for work done here. Whether that is the case depends on the facts, and remote staff living in Spain increase the risk for the company. Many foreign firms avoid the problem by using an employer-of-record service or a local subsidiary to run Spanish payroll for them.

Foreign payroll

A foreign employer with no Spanish presence generally does not withhold anything. It files nothing in Spain, so the tax office only learns about the pay from you.

• Declare the salary as employment income in your annual return (Modelo 100), converted to euros.
• You pay all the tax yourself when you file.
• Employees do not make quarterly payments. That applies only to self-employed people.
• If you paid tax on the same income abroad, you can claim it as a credit.
• Modelo 720 is for foreign assets above a threshold, not for salary. A foreign bank account that holds your pay may still need reporting.

Your employer may still need to register with Social Security if you work in Spain. Ask them to check this.

The return dates change each year, so check the current campaign dates before you plan.

Equity pay

Shares or options from a foreign company follow the same logic as foreign salary. If no Spanish entity is part of the plan, nobody withholds in Spain and you declare the income yourself. If a Spanish entity is involved, ask your employer whether it will withhold and report, so you do not declare the same income twice or miss it.

Ask your employer, before each vesting or sale, who will report it in Spain.

Timeline and deadlines

• Count your days in Spain and check any treaty to see where your salary is taxed: before the year ends

• File your annual return with the foreign salary and pay the first 60%, or all of it: from April to 30 June

• Pay the remaining 40% if you split the tax: by early November

• Renew your A1 certificate or move to Spanish Social Security if your posting runs out: after 24 months of posting

Documents you need

• Proof that you paid tax abroad on the same income, such as a foreign tax statement or payslips showing the tax taken, needed to claim the foreign tax credit in your Spanish return.

• An A1 certificate from your home country's social security, issued before you rely on staying in that system. It covers posting for up to 24 months and applies to EU cases.

Checklist

• Count the days you spent in Spain this calendar year.

• Read the treaty between Spain and your employer's country to see which country can tax your salary.

• Convert your foreign salary to euros and add it to your annual return as employment income.

• Ask Spanish Social Security which country's system covers you, and get an A1 certificate if you are posted.

• Decide whether to pay all your tax at filing or split it into two instalments.

Frequently asked questions

Do I need to file quarterly tax payments on foreign salary?

No, employees paid from abroad do not make quarterly payments on salary. Quarterly payments apply only if you are also self-employed. Foreign tax you paid can be claimed as a credit in the annual return.

Does my foreign bank account have to be reported because my salary goes into it?

Not because of the salary itself, but the account may be reportable. Modelo 720 is a separate declaration for foreign assets above a threshold. Salary is declared only as employment income in the annual return.

What happens to my foreign pay from before I moved to Spain?

If you count as resident for the year, pay earned before you arrived is taxed in Spain too, because the year is not split. Treaty tie-breaker rules and credit for foreign tax can reduce the double tax. Some arrivals can apply for the special impatriate regime (Beckham law) within six months of registering for Social Security.

Do I pay Spanish social security if my employer is abroad?

Usually yes if you physically work in Spain, though an A1 certificate from your home country can keep you in its system for up to 24 months of posting. Without a posting, you or the employer may need to register. Ask the Spanish Social Security office about your case.