Employing people in Spain from a foreign company with no Spanish entity

Terms used

• NIF — The NIF is the Spanish tax identification number.
• Código de cuenta de cotización — The código de cuenta de cotización is the employer account code Social Security gives a company that employs people in Spain.
• RED — RED is Social Security's online system for registering workers and paying contributions.
• IRPF — IRPF is Spanish personal income tax, which employers withhold from pay.
• Gestoría — A gestoría is a Spanish administrative firm that handles tax, payroll and Social Security paperwork.

Key rules

• Informal pay: You cannot pay a person in Spain informally from abroad; you need a registration, an employer of record or a Spanish entity.
• Employer of record: The provider is the legal employer, but you can still share liability if the arrangement is treated as unlawful assignment.
• Permanent establishment: Staff who negotiate and close sales for you usually create a permanent establishment; auxiliary work alone may not.
• Help: A gestoría or tax representative usually handles registration and Spanish returns.

The short answer

You cannot simply pay a person in Spain informally from abroad. You have three legal routes: register your foreign company as an employer in Spain, hire through an employer of record, or set up a Spanish entity. Whichever you pick, watch for permanent-establishment risk. The comparison below sets the routes side by side.

Route 1: Register as an employer without a Spanish company

A foreign company can register directly with Social Security. Do it in this order:

1. Get a Spanish tax number (NIF) for the company, using form 036 or 037 with the Spanish tax agency.
2. Apply to Social Security for an employer account code (código de cuenta de cotización). You present the company's identification documents and proof of your representative's authority.
3. Register the worker and pay contributions through RED, the online Social Security system.
4. Withhold IRPF from pay and file the Spanish returns.

In practice, most companies hire a gestoría or tax representative to do this. The procedure and the proof required are handled by the local Social Security office, so ask them what they want to see before you go.

Route 2: Use an employer of record

An employer of record becomes the legal employer in Spain. It signs the contract, registers the worker with Social Security, runs payroll and withholds IRPF. You direct the daily work.

This is the quickest route if you want to start without setting anything up. It has one real legal risk: unlawful assignment of workers. If the provider is only a labour supplier and has no real business organisation of its own, the worker can claim to be your employee. You can then be jointly liable for certain obligations, and you stay responsible for safety at the workplace. Courts decide this case by case. Choose a provider with a real Spanish operation, and keep day-to-day management from blurring who the employer is. The warnings below cover this in more detail.

Route 3: Set up a Spanish entity

If you plan to hire several people or stay long term, a Spanish subsidiary or branch makes you the employer in your own right. It means more setup and ongoing admin, but it removes the intermediary and the assignment risk. A gestoría can walk you through the steps.

Watch for permanent-establishment risk

Having staff in Spain can mean your company is treated as having a permanent establishment, which brings Spanish corporate tax obligations. This can happen when:

• You have a fixed place of business through which you operate. That includes an office, and a home office that is at the company's disposal.
• A dependent agent habitually concludes contracts, or plays the main role in concluding them, on your behalf.

An employee who only does auxiliary or preparatory work, or works from home with no authority to bind the company, may not create one. An employee who negotiates and closes sales usually does. The tax treaty between Spain and your country can narrow these rules, so take tax advice before the first hire.

Which route fits

• One or two people, a quick start, and low admin: an employer of record.
• A direct relationship and you accept the paperwork: register as an employer, with a gestoría.
• A growing team or sales staff who sign deals: a Spanish entity.

Compare the routes in the table below, and check the documents list before you apply.

Direct hire, temp agency and employer of record compared

Direct hire gives you the most control and the most responsibility. An employer of record (EOR) takes on the legal employer role, but you still direct the work and keep some risk. For a temp agency (ETT), get a written quote and ask the same three questions below.

Side by side

Direct hire

You are the employer, so you set up everything yourself. Your company must be registered with Social Security, which gives you a contribution account number (the CCC). You need it to register each worker and to pay contributions. You can apply online with a digital certificate or Cl@ve, or at a Social Security office with an appointment. You need one CCC per province where you have workers. Online registration is usually quick, often immediate.

Employer of record

Fees are usually a flat monthly amount per employee. Some providers charge a percentage of salary instead, and some add setup or offboarding charges. Prices vary with the provider, the contract length and the number of staff, so compare current quotes from several providers.

The main risk is illegal assignment of workers. Spanish law bans it when a firm only supplies labour and has no real business organisation of its own. If a court sees your arrangement that way, the worker can claim to be your employee. You can also be jointly liable with the EOR for certain obligations. You stay responsible for safety at the workplace either way. Courts decide this case by case, so choose an EOR that runs a real business in Spain and does not just pass names along.

Temp agency

When you ask an ETT for a quote, get these three answers in writing:

• Who is the legal employer.
• Who directs the daily work.
• Who is responsible for safety at the workplace.

Then you can compare it line by line with the other two routes.

Documents you need

• Spanish tax number (NIF) for the foreign company, obtained from the Spanish tax agency with form 036 or 037.

• Employer account code (código de cuenta de cotización) from Social Security, which you apply for with the company's identification and a representative.

• Company identification documents and proof of your representative's authority, to present to Social Security.

• Employment contract signed by the employer of record, if you use one, since it is the legal employer.

What to watch out for

• Unlawful assignment of workers: If your employer of record is only a labour supplier without its own real business organisation, the arrangement can count as unlawful assignment. The worker can then claim to be your employee. Choose a provider with a real Spanish business organisation, and have a lawyer review the contract.

• Liability stays with you as the client: You can be jointly liable with the employer of record for certain obligations if the assignment is unlawful, and for safety at the workplace. Agree safety duties in writing and check how the provider handles them.

• Directing the work can blur who the employer is: The employer of record is the legal employer, but you direct the daily work. Going beyond that can weaken the arrangement. Keep contracts, payroll and registrations with the provider.

Frequently asked questions

Does one employee working from home in Spain create a permanent establishment?

Not always: an employee working from home who only does auxiliary work and cannot bind the company may not create a permanent establishment. A home office at the company's disposal can count as a fixed place of business.

Who is liable if my employer of record arrangement is treated as an unlawful assignment?

You can be liable as the client, because the worker can claim to be your employee.

What do I need before I can register as an employer without a Spanish company?

You first need a Spanish tax number (NIF) from the tax agency, then an employer account code from Social Security. A gestoría or tax representative usually handles this for you. You must also withhold IRPF (Spanish income tax) and file the Spanish returns.