Employees in Spain? Think about your registration!
Do you own a foreign company and are you going to hire employees in Spain? If those employees work and live in Spain, they will probably have to pay social security contributions and payroll taxes in Spain. The nationality of the employees doesn’t matter in this case. In case employees come to Spain for only a short period of time, they will continue to pay their taxes and social security contributions in their country of origin.
If you have employees in Spain, as an employer you should have a registration in Spain. Depending on the specific situation, this could be a permanent or non-fixed establishment. A permanent establishment can be, for example, a Sociedad limitada. A non-fixed establishment is an entity linked to and dependent on the parent company. Recently the regulations in this regard and criteria of the Spanish tax authorities have been tightened, which soon leads to permanent establishments. Either way, an employer registration in Spain will have to take place when there are employees in Spain. Also certain tax obligations will arise in Spain.
It is important to arrange this properly, preferably before the employees are hired in Spain. Registration of the employer in Spain at a later stage (when the employees are already working in Spain for the parent company) can cause problems. These can be resolved, but it creates a long and valuable process. This because a late registration causes a regularization to be made for the previous period, when the employees were already working in Spain but the employer hadn’t registered yet, a regularization process should take place. This means that social security contributions and taxes should still be paid retrospectively over the previous period and payrolls must be prepared. This too can all be arranged, but as you might expect from a bureaucratic country like Spain, you will have to pay certain increases and fines. Also it could take a long time to get this sorted out. However, these fines can be avoided when you voluntarily start the regulation process. So in case you already have employees in Spain and you have not yet registered as an employer in Spain, it would be better to regularize the situation voluntarily, rather than to wait until the Spanish authorities will take action themselves.
OTIS Legal Group is happy to advise you and will help you to regularize your situation properly or solve it adequately.