Spain has long been the favoured holiday destination for many
sun-seeking Brits. The proposed introduction of a new digital nomad
visa, opening the door to both “working holidays” and
longer term relocations, will therefore be welcome news to
But will these potentially complex arrangements now be more
straightforward for employers to navigate? We consider the
potential employment, immigration and tax implications.
The pandemic saw a surge in requests from employees to work
remotely in another country, often for an extended period.
Initially, requests were usually short-term relocations related to
the crisis. Increasingly, however, requests have involved permanent
or semi-permanent moves abroad, with the trend continuing even
though the public health crisis has now abated.
The challenges of the “digital nomad”
Such requests create headaches for employers. No one wants to
upset their staff or put themselves on the backfoot in the war for
talent. At the same time, employers are faced with a litany of
legal issues which we have considered in detail before.
Would the employee’s activities in the third country create a
“permanent establishment” for corporation taxes? Would
the employer need to register to withhold income tax, and pay
employer social security charges? Does the employee have the right
to work, or could the employer find itself facing immigration
penalties? Would the employee find themselves in possession of a
host of local employment rights, able to take the employer to a
local labour court they know little about in the event of a
dispute? Will the local labour inspector come knocking at the
employee’s door? What about data protection? Regulatory issues?
Health and safety?
It’s therefore understandable that employers tend to tread
carefully on this issue. This can mean requests being refused,
authorisations time limited, or permission being granted only in
specific circumstances (such as where there is an existing local
entity that can employ staff). Employers of record present one possible
solution, but this arrangement is not without its own
Digital nomad visas – the legal implications
Is there a better way? Some countries think so: the Bahamas was
fastest off the mark with a “digital nomad visa”. The
basic premise behind this is that, in return for attracting well
paid staff to come and spend their earnings in the local economy,
the visa conditions mean that employers won’t need to worry
about any of these complex issues. Countries as diverse as Estonia
and the UAE have since followed suit.
Now comes a possible game changer for British employers: the so
called “Start-up Law” recently introduced as a bill in
the Spanish Parliament, with approval anticipated by the end of
2022. This seeks to establish a brand-new visa and residence permit
for “digital nomads” which will permit people working
remotely for foreign companies to live in Spain without needing a
full work visa or a local sponsoring entity.
This latest development will be of particular interest to many
UK employers, given Spain’s huge popularity as both a tourist
and second home destination for Brits; at end of 2020 it was
estimated that there were over 380,000 British citizens residing in
Spain. However, employers will need to pay close attention to the
detail: although the new visa will make life easier as far as
immigration law is concerned, there remains a potential sting in
the tail with respect to tax and employment law.
If approved, the bill will be a turning point in terms of
Spanish immigration law. Permit-holders will be allowed to work
remotely in Spain provided that their employer is located abroad
and does not operate a Spanish entity. In addition, self-employed
“freelancers” will be able to work for Spanish clients,
provided that the time spent does not exceed 20% of the
individual’s professional activity.
Under the proposed legislation there are two main immigration
routes available for individuals:
- Visa for international remote work: this is
intended for qualified professionals, graduates, postgraduates of
renowned universities, vocational education, and renowned business
schools or applicants with at least three years of professional
Foreign nationals (not ordinarily residing in Spain) who intend
to stay and work remotely for a non-Spain-based company would be
able to apply for a visa which will be valid for up to one year, or
the duration of their employment contract if shorter.
Visa holders would also have the right to apply for a
“residence permit for international remote work”,
starting 60 calendar days prior to the expiry of their visa,
provided the conditions that led to their original visa being
granted are still satisfied.
- Residence permit for international remote
work: foreign nationals who either hold the “visa for
international remote work”, or who otherwise have legal status
to reside in Spain, would be able to apply for this type of
This permit would be valid for up to three years, or the
duration of the contract if shorter. Thereafter, holders would have
the right to renew their permits for periods of two years, provided
that the conditions of its original approval continue to be
The employment law implications of the proposed visa, however,
are more complex. If employees work remotely in Spain for UK
employers under the new visa, the arrangement will not qualify as a
“secondment” under the Spanish legislation that
implements the EU Posted Workers Directive. This means that (under
this legislation at least) none of the local legal protections
associated with secondments – including the obligation to grant to
seconded employees certain minimum employment rights and conditions
– would apply.
Even where visa holders’ contracts are governed by UK law,
the position on whether local employment rights will apply is not
straight forward. Although an individual employment contract may be
governed by the law agreed between the parties, this choice of law
is not unfettered; under EU rules, certain mandatory rules (meaning
those which can’t be derogated from by agreement) cannot be
contracted out of.
This begs the question which mandatory rules trump this choice
of law? These are the mandatory rules of the country:
- in which the employee “habitually” carries out their
- in which the place of business through the employee was engaged
is situated; or
- which is “more closely connected” with the contract
based on all existing circumstances.
When a comparison is made between the law chosen by the parties
and the applicable mandatory rule, whichever gives greater
protection to the employee will apply.
In this context, this means that Spanish legislation in its
entirety (including applicable industry-wide Collective Bargaining
Agreements (CBA)) would apply to UK employees working remotely in
Spain if the following conditions are met:
- the Spanish legislation grants them enhanced rights when
compared with UK legislation; and
- the employee will habitually carry out their work in Spain
(placing importance on determining how much time the employee will
stay in Spain working remotely as compared to their time spent
providing services from the UK), or the employee
is able to prove stronger ties with Spain than with the UK (for
example: if social security contributions are paid in Spain; the
employee becomes a Spanish tax resident; or has worked in Spain for
longer than they have worked in the UK).
With this in mind, it may sometimes be prudent for overseas
employers with employees working remotely from Spain under the
proposed visa to acknowledge and grant the minimum working
conditions established by Spanish legislation and the applicable
Spanish CBA. In particular, this would be advisable with respect to
rules regarding workplace accidents, which would involve the
Spanish Labour Authorities. However, what is appropriate will
depend on the circumstances, and we would recommend seeking local
advice on a case-by-case basis.
The draft “Start-up” Act does not include any special
provisions in respect of corporation tax. This means that the
question of whether a company will be considered to have a
permanent establishment in Spain because it sends an employee there
under the new visa scheme will be determined by the existing
legislation. In addition, double taxation treaties signed by Spain
will continue to apply. Although this is a fact specific question -
mere presence of a digital nomad does not necessarily mean that
there is a permanent establishment in Spain – it may be a
practical limitation on employers allowing staff to avail
themselves of the new visa.
Income tax and social security
As long as an employer does not carry out an “economic
activity” in Spain (defined as “the organisation on
one’s own account of means of production and / or of human
resources, with the aim of intervening in the production or
distribution of goods or services”), which will be the case
for most digital nomads, there will be no obligation for the
company to withhold tax on employment income in Spain.
As “digital nomads” will conduct their activity in
Spain, they will be covered by the Spanish social security system
and must, therefore, contribute to it. That said, those who have a
valid Social Security Coverage Certificate validly issued by a
Member State of the European Union, or by a state with which Spain
has signed a Social Security Agreement (which includes the UK by
virtue of the post-Brexit trade deal), will be exempt from this
Time will tell whether the proposed new visa will result in a
renewed upsurge in requests to work from Spain, and businesses
should keep a close watch on the extent to which other countries
follow Spain’s lead by introducing similar measures. Whilst
this won’t be in place for this summer season, if the Spanish
government follows through on its plans, employers may wish to
consider relaxing their rules on employees working from
“home” in Spain in summers to come.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.