In an increasingly globalized world, the weight of international remote working is increasing in international labor relations. In this scenario, one of the most common situations to arise is the following:
- A person resides in a foreign country, but works remotely for a company located in Spain.
- That same person travels sporadically to Spain.
- What happens with taxation of remuneration earned for the work performed? In which country are they taxed?
Before answering this question, it is important to bear in mind that each case warrants a particular taxation analysis, since everything will depend on the employee’s personal and working conditions.
1) Working remotely from abroad for a company located in Spain
As each situation must be addressed on a case-by-case basis, to answer this question we refer to an inquiry made to the Directorate-General for Taxation (DGT CV 10-10-2023) which analyzes the following case: an enquirer, resident for years in Italy, has been hired since April 2022 by a Spanish company to provide his services from his usual place of residence through the remote working system, traveling sporadically to Spain whenever his presence is required.
Taking these facts into consideration, the DGT is asked about this person’s tax situation, seeking to avoid double taxation.
2) What is the response from the DGT?
The Directorate-General for Taxation assumes the following:
- The employee is a tax resident in Italy.
- The work performed for the Spanish company is as an employee, in the form of salaried employment.
What is the first thing the DGT states? That taking into account that this is income obtained by a resident in Italy and paid by a Spanish company, we have to study and analyze the provisions of the Agreement between Spain and Italy in order to avoid double taxation on income tax (signed in Rome on 8/9/1997).
What does this Agreement state? That with respect to income from employment, wages, salaries and similar remuneration earned by a resident of a hiring country by reason of paid employment, that resident can only be subject to taxation in that country, unless the work is performed in the other hiring country. If the work is performed in the latter country, the income obtained for this work may be subject to taxation in this other country provided certain conditions do not apply (for this specific situation, those listed in Article 15 of the Spanish-Italian Convention).
In this regard, the OECD Model for Tax Convention on Income and on Capital, in relation to the taxation of salaried income, states that said work is performed at the place where the employee is physically present when performing the work for which he/she is paid an income.
Taking into account what both Conventions say, the DGT concludes with the following solution for this particular situation:
- What income is taxed in Spain under Non-Resident Income Tax? One that the taxpayer earns as a consequence of services that require a trip to Spain and are physically performed in that territory (provided, however, that the requirements of paragraph 2 of Article 15 of the Spanish-Italian Convention do not apply, in which case this income would be taxed in the country of residence, i.e. Italy).
- What income is taxed in Italy, his/her country of residence? Any income earned as a consequence of services rendered from Italy to the company located in Spain through remote working.
3) ✅ Do you need advice on international taxation?
At the Gesdocument Talent & Mobility Business Unit we have experts in the analysis and study of international taxation of workers. Keep in mind that each case warrants a specific analysis.
We can help you optimize your taxation through prior planning specific to your situation.
Among other services, we can help you analyze:
- How to prevent double taxation.
- Tax incentives for international mobility.
- Exemption from taxation of income earned for work performed abroad.
Do you need us to help you? Contact our professionals without any obligation.
