What your foreign employer risks when you work from Spain

Terms used

• Retención — The retención is income tax your employer deducts from each payment of your salary and pays to the tax agency.
• NIF — The NIF is a Spanish tax number, which your employer needs in order to file withholding returns.
• AEAT — The AEAT is Spain's tax agency.
• IRPF — The IRPF is Spain's personal income tax, charged on residents' income.
• TGSS — The TGSS is Spain's Social Security office, where employers register and pay contributions.
• A1 certificate — The A1 certificate proves you stay in another EU country's Social Security system while working in Spain.

Key rules

• Permanent establishment: A home office creates one only if it is at your employer's disposal as a place of business, or you habitually conclude contracts for it.
• Withholding: If your employer does not withhold, you settle the income tax yourself through your annual return.
• Social Security: Working from Spain normally puts you in the Spanish system, unless an A1 certificate applies.
• Labour rules: Spanish minimum labour protections can apply to you even if your contract is under foreign law.

The short version

Your employer's risk comes from three things: a possible permanent establishment, income tax withholding on your pay, and Social Security registration. These explain why some employers refuse to let you work from Spain, or restructure your job (for example, by moving you to a contractor, a local employer service or a Spanish entity).

Permanent establishment: does your home office count?

A permanent establishment (PE) is a taxable presence of a foreign company in Spain. If your employer has one, it can owe Spanish corporate tax.

Your home creates a PE in only two cases:

• It works as a fixed place of business at your employer's disposal, through which the business is carried on.
• You habitually conclude contracts for the employer, or play the main role in concluding them.

Working from home for your own convenience is normally not enough. The risk goes up if your employer requires you to work from home and your work is core to the business. Spain's tax treaties generally follow the same international model. Spanish tax officials decide case by case, so the outcome depends on your facts and the treaty between Spain and your employer's country.

Salespeople who sign deals, and senior staff who run a business line, are the highest-risk roles.

Payroll withholding: who pays your income tax?

Pay for work you do in Spain, as a Spanish tax resident, is taxed in Spain. Normally your employer withholds income tax (retención) from each payment. A foreign employer with no Spanish entity must do this if it has a PE. Without a PE, whether it must withhold is debated, so ask a tax adviser for your case.

In practice, the employer gets a Spanish tax number (NIF) and registers with the AEAT. It then files quarterly withholding returns (Modelo 111) and an annual summary (Modelo 190).

If your employer refuses, the tax does not disappear. You settle it yourself through your annual IRPF return, and sometimes through quarterly payments. That means a bigger bill at once, so set money aside.

Social Security: Spain or your employer's country?

Under EU rules, you are insured where you physically work. If you work from Spain, you are normally in the Spanish system. Your employer must then register with the TGSS as an employer and pay contributions for you.

There is one exception. Under the EU telework framework agreement, which Spain has signed, you can stay in your employer's country's system if you work from home in Spain for less than 50% of your time. You need an A1 certificate to prove it. Without it, Spanish registration applies.

For 2025, Spanish contributions were roughly 30% from the employer and 6.5% from you, on earnings up to a cap, plus a small extra levy (MEI). These rates are reset each year. This cost is often what makes an employer say no.

If your employer is outside the EU, a bilateral Social Security agreement may apply. Check the agreement between Spain and that country.

Labour law still applies

If you habitually work in Spain, Spanish mandatory rules can apply whatever your contract says. These cover minimum wage, holidays, working time, dismissal protection and the remote-work law. A foreign-law contract does not remove them.

How stable is your arrangement?

Your setup is more stable if your employer:

• has a Spanish entity, or uses a local employer service;
• is registered with the AEAT and withholds tax;
• is registered with the TGSS, or holds an A1 certificate for you;
• accepts that Spanish labour minimums apply.

It is less stable if the employer has ignored all of this. The risk then falls on you in back taxes, and the employer may end the arrangement once it notices. Use the checklist below to raise these points with your employer, and the documents list to see what each side needs.

Documents you need

• A Spanish tax number (NIF) for your employer, issued by the AEAT (Spain's tax agency), so it can file withholding returns.

• Your employer's registration with the Spanish Social Security (TGSS) as an employer, needed if you are insured in Spain.

• An A1 certificate, which keeps you in another EU country's Social Security system. It applies only if you work under 50% of your time in Spain under the telework agreement.

Checklist

• Ask your employer whether working from your home could create a permanent establishment in Spain.

• Ask your employer whether it will register with the AEAT and withhold income tax on your salary.

• Ask whether your employer will register with Spanish Social Security and pay contributions for you.

• Ask whether an A1 certificate is possible for your case, given the share of time you work in Spain.

• Check that your contract respects Spanish minimum wage, holidays, working time and dismissal rules.

• Book a session with a tax adviser to confirm the position for your case.

Frequently asked questions

Does my home office in Spain create a permanent establishment for my employer?

Usually not, if you work from home for your own convenience. A home office counts as a permanent establishment only if it is a fixed place at the employer's disposal, or if you habitually conclude contracts for the employer.

What happens if my employer refuses to register payroll withholding in Spain?

If your employer does not withhold, you must settle the income tax yourself through your annual return, and sometimes through quarterly payments. Employers who register get a Spanish tax number and file quarterly and annual withholding returns. Ask your employer which route it will take before you start.

Can I stay in my employer's Social Security system while working from Spain?

Yes, but only if you work under 50% of your time in Spain and your employer obtains an A1 certificate under the EU telework framework agreement, which Spain has signed. Otherwise you are normally insured in Spain, and your employer must register with Spanish Social Security and pay contributions. For employers outside the EU, a bilateral agreement decides.