Covid is causing a significant shift in behaviour with many involved with office work becoming accustomed to working from home. Having experienced working from home, many people are seeing the opportunity to live in sunny Spain, whilst maintaining their employment in a UK or other non-Spanish company.
We are receiving numerous enquiries from individuals who have agreed with their non-Spanish employers that they can work from their home in Spain, for all or a significant part of the year.
The quality of life in Spain and lower cost of living is attractive for families, but also for single individuals who want to experience living in the vibrant cities of Barcelona, Valencia, Madrid and Málaga.
Technology advances with networking, video calling, file sharing systems and IP telephony have all contributed to making remote working economically and technically viable.
Options for setting up as working from Spain
First and foremost an individual must ensure that they have the right to live and work in Spain.
EU citizens or Brits with Withdrawal Agreement residency rights have these rights automatically and only need to formalise their situation in the Spanish labour, social security and tax systems.
Brits who were not living in Spain before 31 December 2020 do not have automatic Spanish residency rights and are currently restricted to living in Spain for a maximum of 90 out of 180 days, effectively being treated as tourists. Available options for non-EU citizens are explained later in this article.
For those with the right to live and work in Spain these are two viable options:
Self-employment
The simplest of the available options is simply to establish a service contract with the employer (as opposed to an employment contract).
Having done this the individual would register as self employed in the social security and tax systems.
Social security:
As a new self-employed person, social security contributions (2021 rates) are:
- Months 1 to 12: 60€ per month
- Months 13 to 18: 144,49€ per month
- Months 19 to 24: 202,280€per month
For males under 30 and females under 35 the contributions for months 19 to 24 also apply to months 25-36.
If living and working in a municipality with less than 5.000 residents the rate for months 1 to 12 is extended to months 13 to 18.
After the initial reduced charge period social security contributions are at 288,98€ month (2021 rate).
For those over 48 years old, contributions are somewhat higher in all the cases explained above.
Tax system:
Self-employed individuals must register in the income tax system and file quarterly and annual income and IVA (VAT) declarations.
There is no minimum income exemption for IVA purposes in Spain, so an individual must file regardless of the level of income. For a self-employed person charging fees to a foreign company, it would be necessary to file a total of 11 tax declarations each year and keep a simple register of income and expenses.
The registration process is very simple and quick, taking no more than a day or two to complete, if the individual has an NIE number. It is also necessary for the individual to obtain a digital certificate to facilitate all the various filings.
Fees charged by a self-employed individual to foreign businesses are usually exempt from IVA, but this still requires the filing of IVA returns.
A conventional Spanish bank account is needed for social security and tax direct debiting purposes.
The deduction of expenses for persons working from home are very limited but supplies that are obviously exclusively used in the business activity may be deducted as would be travel expenses for trips solely related to the business activity.
A final point: A carefully drafted service agreement is essential to avoid the relationship between the self-employed individual and the ‘employer’ being misconstrued as a normal employment relationship. Getting this wrong could expose the foreign employer to serious problems with the social security system and labour tribunals.
Normal employment
It is perfectly feasible and indeed frequent to register a foreign company as an employer in the Spanish system.
The process takes some time as the employer must arrange for registrations in the labour, social security and tax systems and requires obtaining a digital certificate as well as the formal appointment of a representative in Spain to manage these formalities. A power of attorney must be provided by the employer to the representative.
The employment contract will need to be registered and the terms and conditions of employment will need to be adapted to the Spanish labour and social security system.
The employer will then have to make monthly social security and quarterly and annual tax filings. In total 17 filings each year.
The employee will need to be registered in the social security system and the tax system but will only be required to file a single annual income tax return.
Employers should note that as Spanish regulations apply, social security costs will be approximately 36% (6% employee and 30% employer) of gross salary. However, no additional employee or employer contributions apply to salaries over 49.000€.
Advice should be obtained by the foreign company to ensure that the Spanish social security and tax registrations do not cause the company to be regarded as having a permanent establishment is Spain that would cause other formalities and costs to arise in Spain, like corporation tax filings.
Employee makes use of a UK or foreign limited company
Although it is popular for people originating from the UK to use UK limited companies to receive income, little is achieved in the case of an individual who lives in Spain.
However, there may be a role for a UK company in very limited circumstances in the case that the individual is not able to obtain a work permit in Spain, see below.
Obtaining permission to live and work in Spain, post Brexit
Citizens of third countries, including the UK, may not live in Spain without obtaining a residency permit.
The simplest permit to obtain is the non-lucrative visa. Although bureaucratically tedious, this is relatively easy to obtain if a person has sufficient available capital or income, defined in the case of an individual as having demonstrable income of at least 27.000€ or a bank account with at least this balance.
The problem with the non-lucrative visa is that it does not provide the right to work in Spain.
A person wanting to live in Spain might find a UK service company useful to receive income if the activity of that company does not imply that the individual is actually working in Spain, as this would breach work permit regulations.
However, the Spanish Government issued a proposal in mid-2021 to extend the golden visa regime to individuals who want to live in Spain but work remotely for foreign businesses. If this proposal finally makes it into law, then remote workers will be able to live and work remotely in Spain for a foreign employer without difficulties, only being required to obtain a suitable permit. If this new regime is incorporated into the golden visa application process, then the applying for the permit would be a lot simpler and quicker than the non-lucrative visa regime.
