The General Directorate of Taxation (DGT), a body under the Ministry of Finance and Public Works whose main task is to establish the criteria for the application of the different taxes, including income tax, has already provided us with answers in recent months.
If the taxpayer teleworks from a foreign country with which Spain has signed an agreement to avoid international double taxation and is resident for tax purposes in that country, the DGT grants that country exclusive taxing power. Spain would not have the right to subject the labour income obtained by this digital nomad to personal income tax or non-resident income tax (IRNR), even if it is paid by a Spanish company for the work performed remotely by its employee.
This is a powerful tax planning tool because if the country chosen for teleworking offers a favourable tax regime and even a lower cost of living, the equation results in a higher net disposable income and greater purchasing power for the teleworker without the need for a salary increase. From the employer’s perspective, this can also be an effective tool for attracting and retaining talent. As with flexible compensation schemes that allow employees to forgo a portion of their salary in exchange for tax-advantaged benefits in kind such as meal cards, health insurance, travel passes or childcare, you can increase employee engagement without driving up labour costs by allowing them to telecommute from another country.
This is entirely possible in Portugal, where the “Régimen de Residentes no Habituales” allows taxation at a flat rate of 20%, and probably at a slightly lower cost of living than in cities like Madrid or Barcelona. At certain salary levels, this rate can be almost half of what they would pay in Spain.
Again, if an employee of a Spanish company wants to telework in another country for a short period of time, the agreement to avoid international double taxation between Spain and these countries makes it much easier logistically and fiscally. This is because if the presence in each country does not exceed 183 days in the tax year or in a twelve-month period that begins or ends in the tax year in question, each of these countries should not be entitled to tax the employee’s salary. There would also be no reporting and withholding tax obligations for the company in these countries.

From the other perspective, i.e. Spain as a host country for digital nomads, the same rule could apply. In other words, teleworkers who choose to transfer their effective and tax residence to Spain could benefit from the special regime for posted workers from 2023, also known as the “Beckham Law”, which allows them to pay tax on the salary paid by their employer abroad at a fixed rate of 24% and not pay tax on their financial income or capital gains, for example.
However, I need to plan accordingly to allow my employees to telework from another country by checking, among other things, whether or not I am obliged to register for withholding tax purposes in the other country. Or whether the activity or my presence in the other country harbours the risk of permanent establishment.
Companies, especially beyond our borders, are implementing a remote or hybrid working policy that allows their employees to telework temporarily or permanently from another country. In this case, the employee submits a reasoned request for international teleworking to the HR department, which authorises it after a case review. Channelling and monitoring these international teleworking requests is crucial to avoid legal and tax problems for both the employee and the company. It is also important to ensure the health and safety of the employee when teleworking and to know where our staff are at all times so that we can take action in the event of illness, natural disasters and unfavourable socio-political situations, among others.
To name just a few countries that have a special tax regime for mobile taxpayers: Italy, France, Belgium, the United Kingdom, Portugal, the Netherlands and, of course, Spain. Other Eastern European countries do not have a de facto special regime, but have very competitive tax rates, such as Poland, the Czech Republic, Slovakia, Cyprus, Estonia, Lithuania and Latvia.

As far as social security is concerned, a few months ago the European Commission issued a recommendation to the Member States to allow teleworkers to remain in the social security system of the country in which the employment contract was concluded and not to be obliged to pay social security contributions in the country from which they are teleworking. This recommendation has been repeatedly extended since its publication, most recently until 30 June 2023.
This flexibility offers companies and digital nomads much more certainty for this form of international teleworking, as it avoids the obligation to register the company in the other country for social security purposes and allows the employee not to interrupt their contribution payments, which could lead to a reduction in current and future entitlements. However, the articles of the EC Regulation regulating temporary posting need to be amended to take account of international teleworking and give it greater legal certainty.