remotely

A programmer’s innocent question about the availability of remote positions on a development platform in Spain has sparked an interesting international debate in X about a reality of the Spanish labor market that many were unaware of: those companies who hire in Spaineven if they are remote, must pay taxes in Spain. The problem is that not everyone can bear that additional cost. A complicated labor market A Spanish software developer asked in X to the CEO of Vercela cloud infrastructure platform of Argentine origin, on the availability of vacancies in Spain since, when carrying out the search, they only appeared in Germany and the United Kingdom, when in the past they had hired in Spain. The manager’s response It was simple, but it hid a reality that many companies that want to hire engineers and programmers in Spain face: “Unfortunately, we had to leave Spain; it was incredibly difficult to hire staff and expand our company there. We tried!” The expert analyst of technological employment trends, Gergely Orosz, witness to the conversation, pointed out some of the difficulties that companies that want to hire in other countries find, even if it is a remote work agreement:”(…) explains why ‘remote’ positions are often ‘remote in country X’. When a company employs someone who works remotely in country Y, they must follow the country’s regulations and following those regulations can be costly and time-consuming. Present rigid procedures, mandatory processes with a lot of paperwork, etc. “Most American companies are baffled by these requirements in European countries,” the analyst wrote. You hire in Spain, you pay taxes in Spain Spanish and international legislation, described in article 15 of the Tax Agreement on Income and Wealthdoes not make distinctions between remote or in-person hiring. Therefore, a foreign company that wants to hire someone with tax residence in Spain and who is going to work remotely from the country, must meet exactly the same tax obligations and requirements What if you hire her to go to a physical workplace every day. The problem, to hire someone in Spain, is that the company needs to be registered with Social Security to pay contributions, and have a Tax Identification Number. That is, it is necessary to be a natural or legal person in Spain. This implies that the company should have a tax representative in the country or what is called Permanent establishment. In other words, the foreign company must have a headquarters based in Spain to channel through it hiring in Spanish territory and comply with tax and labor obligations. Tap on the image to go to the original message As entrepreneur and developer David Bonilla points out in a message response thread from the founder of Vercel, there are several options for hiring in Spain, but none of them are easy for companies or workers, especially if they do not have the capacity to open a headquarters (or subsidiary, branch, permanent establishment or any other legal figure of representation) in Spain. The risk of going from worker to “headquarters” Once the headquarters option has been ruled out, the alternatives result in the employee becoming a service company by becoming self-employed or by establishing a limited company and billing its services to the foreign company as a commercial activity, not labor. However, that would mean walking on a knife’s edge for two reasons: the first is that if there is not a very clear definition of the commercial terms and conditions, the relationship can be interpreted as signs of employmentwhich brings us to the figure of the false self-employed. On the other hand, the Tax Agency could consider that these self-employed workers or companies act as a subsidiary of the company to which they invoice, so they must respond not only for their activity, but also for that of the “parent” company. On the other hand, it is also possible to do it by intermediary recruitment platforms as Deel either remote. These companies act as a bridge between the worker and the companies, preventing the contractor from having to assume all the tax procedures. Therefore, in some way, despite working for the company that contracts the service, from an administrative point of view you will really be working for the intermediary that provides the service. The use of these intermediaries (Employer of Record or EOR) increases the labor cost bill by between 10% and 20%, which leaves Spanish employees in a less competitive position with respect to other countries. In general terms, the difficulties that the CEO of Vercel pointed out for its deployment in Spain is that, to hire a single person in Spain and remotely, they need to comply with the same requirements as for hiring 1,000 employees. If the company’s priority is not to be present in the Spanish market, the implementation effort to hire one or more people is not worth it. This implies that it is conditional to hire in Spain, even if it is for work remotely from Spainbecause that company already has infrastructure in the country. This tax and labor policy is much more lax in countries like the US, the United Kingdom or India, which is why it is much more common for large technology companies to hire programmers and remote employees in those markets. In Xataka | Finding a job had always been a good way to escape poverty: in Spain it is no longer true Image | Unsplash (Magnus Andersson, Thammy Kolb)