Spain Tightens Tax Monitoring of Foreign Remote Workers: What You Need to Know

The rise of international remote work after COVID has radically changed how people live and work across borders. Governments, however, are now catching up. In this context, the Spanish Tax Authority has announced increased monitoring of foreign remote workers who spend more than half the year in Spain.

This development has important tax consequences not only for individuals, but also for the foreign companies that employ them.

1. Spending More Than 183 Days in Spain: Tax Residency Risks

Under Spanish tax law, an individual is generally considered a Spanish tax resident if they:

• Spend more than 183 days per calendar year in Spain, or

• their center of economic or life interests is located in Spain.

For remote workers living in Spain while working for a foreign employer, exceeding this threshold may trigger full Spanish tax residency, meaning worldwide income becomes taxable in Spain.

2. A Key Risk for Employers: Permanent Establishment

One of the most significant concerns raised by the Tax Authority is the risk that a remote worker’s activity in Spain could create a Permanent Establishment (PE) for the foreign company.

This may happen when:

1. The employee habitually works from Spain, and

2. Their activities are essential to the company’s business, or

3. They have authority to negotiate or conclude contracts, or

4. Spain effectively becomes a fixed place of business for the company.

If a Permanent Establishment is deemed to exist, the foreign company may be required to:

• Register with the Spanish Tax Authority

• Pay Spanish corporate taxes on profits attributable to Spain

• Comply with Spanish accounting, VAT, and employment obligations

This is a high-risk scenario that many companies are not currently accounting for.

3. OECD Guidelines and Post-COVID Clarifications

The OECD has updated its guidance on Permanent Establishments to address the realities of remote work. While temporary remote work during the pandemic was often excluded from PE analysis, long-term or permanent remote arrangements are treated very differently.

Spain is now actively applying these updated criteria, especially in cases where remote work has become a stable and ongoing situation.

4. Why Spain Is Acting Now

Spain, like many other countries, has experienced a sharp increase in:

• Digital nomads

• Remote employees of foreign companies

• Cross-border teleworking arrangements

This boom has made it necessary for tax authorities to clarify and enforce tax rules to prevent unintentional non-compliance and tax avoidance.

5. What Remote Workers and Companies Should Do

If you are a remote worker living in Spain—or a foreign company with employees working from Spain—you should:

• Review your tax residency status

• Assess Permanent Establishment risks

• Analyze applicable double taxation treaties

• Consider special regimes such as the Beckham Law or the Digital Nomad Visa, where applicable

Early legal and tax planning is essential to avoid unexpected liabilities, penalties, or compliance issues.

Final Thoughts

Remote work offers incredible flexibility, but it also brings complex cross-border tax consequences. Spain’s increased scrutiny makes one thing clear: living and working remotely from Spain without proper planning is no longer a low-risk option.

At American&Legal Spain, we help U.S. expats, digital nomads, and international companies navigate Spanish tax, immigration, and compliance issues with clarity and confidence.

If you are working remotely from Spain—or planning to—getting advice early can save you significant problems later.