You can read an updated version in 2020 at: "Teleworking from Spain: legal aspects to bear in mind".
Today, in the midst of the digital era, it is not uncommon for our human capital to be hired by non-resident entities to “telework” from Spain. But what are the tax implications of such means of work for both the company and the employee?
Working from home tax deduction
In accordance with the comments in Article 15 of the OECD Model Tax Convention on Income and Capital, the employee can only be subject to taxation in Spain; i.e. the mere fact that the services are operated in the state where the non-resident entity is located cannot determine taxation in a country other than Spain. Therefore, the employee – as a tax resident – will be taxed on all of his or her income in Spain regardless of whether the payer of his or her income is a resident abroad.
On the other hand, in accordance with article 76 of the Personal Income Tax Regulations, a foreign company which is not permanently established in Spain and does not carry out any activity in Spain will not be obliged to withhold tax.
In short, it is the worker who has to face the tax burden, through the corresponding income tax return. The foreign employer will not be subject to any tax obligation in the matter of withholdings.
If you have any doubts about telework taxation, please do not hesitate to contact our team of professionals.