When contracting in Spain, you must pay taxes on your earnings. Depending on your citizenship and visa status this may not be triggered until you have spent 183 days working in Spain. It is important to get an understanding of Spain's tax laws to avoid paying more than necessary or find yourself dealing with underpayment issues. You can do the research yourself if you are fluent in Spanish and have the time, but most contractors find it easier and more cost effective to use a tax specialist. In addition to paying taxes in Spain, your home country may require taxes on your earnings as well. As you can see, the process can quickly become more complicated.
Dealing With Spanish Tax As a Contractor
Determining the amount of taxes you have to pay depends on the type of contract, your home country and how taxes are handled by your client. Most contractors will be responsible for resolving their own tax situation which can be an administrative burden, especially with tax laws changing regularly in Spain. It's vital to always know how taxes work for your specific situation to avoid any penalties.
Using an umbrella company for payment in spain can be the easiest solution for many contractors. A multinational umbrella company can help you make the most of the 183 day rule and then run you on a local payroll when you are domiciled in Spain. An average contractor will net 70% of gross billing (i.e. 70% of the amount paid by the recruitment agency) using an umbrella company. This is after all taxes, fees and social contributions have been deducted.
Most foreigners will seek professional assistance to fully understand your situation and ensure you comply with every tax law in Spain. You don't have to handle tax in Spain at all if you don't want to. An umbrella company can act as your administrative savior, from handling taxes to dealing with work permits. You work, you get paid, you relax!