More and more people live in Spain while working remotely for a company based elsewhere. Spain’s Directorate-General for Taxes (DGT) has just settled a question that keeps coming up for this group: where is salary taxed when the paying company is based abroad with no presence in Spain? The answer, set out in binding ruling V1339-26, is clear — and it has real practical consequences.
Where you physically work determines where you’re taxed
The case the DGT examined involved a Spanish-resident remote worker employed by a Portuguese company with no permanent establishment in Spain. The authority’s conclusion was unambiguous: the salary is taxed exclusively in Spain, because what determines taxing rights over employment income is where the work is physically carried out, not the country where the paying company is registered.
This confirms a principle that already followed from Spanish law and double-taxation treaties, but one that causes frequent confusion in practice, especially since cross-border remote work became commonplace after the pandemic. For the worker, the practical consequence is that this income must be declared on their Spanish personal income tax return, exactly as if they worked for a Spanish company.
The foreign employer has no obligation to withhold tax
The other side of the ruling is just as significant: the DGT clarifies that the Portuguese company is not required to withhold Spanish income tax on that salary, precisely because it does not operate in Spain and does not qualify as a “payer” for Spanish withholding purposes. In practice, this means the worker receives their full salary and must handle their Spanish tax obligations directly — typically through instalment payments or by adjusting their annual return — rather than having tax withheld at source.
This calls for more active tax management than an employee on a Spanish payroll would need, since there the employer automatically handles withholding. Without proper planning, it is easy to arrive at tax return season with a significant balance due.
It is also worth not confusing this question with tax residency itself: the DGT’s ruling does not address where the worker is resident, only where a specific item of employment income is taxed once Spanish residency is already established. These are two separate questions worth reviewing independently, particularly in the months right after moving your tax residence to Spain.
What this means for you
If you live in Spain and work for a foreign company with no presence here — whether as a remote employee or under a “digital nomad” arrangement within the EU — this ruling affects you directly: you must declare that income in Spain, and since there is no withholding at source, it is worth planning for the tax impact rather than discovering it at filing time. The same applies if you employ people in this situation: make sure they understand their obligations to avoid surprises.
At EBF Consulting we help professionals who work remotely from Spain for foreign employers plan their tax position properly and avoid last-minute surprises. If this applies to you, or to someone on your team, let’s talk and we will help you get organised.
Official source: Binding Ruling V1339-26, Directorate-General for Taxes