If your company is looking for remote international talent, you may be considering hiring workers abroad as independent contractors. Remote contractors can be an extremely cost-effective source of talent for startups and smaller companies that want to expand, without the overhead of full-time employees.
Nonetheless, there are a few complexities when it comes to hiring remote international contractors when compared to hiring a similar worker at home. You will need to consider the method of hiring and payment, tax obligations, and compliance risk to make sure that the engagement is successful.
- Why hire remote contractors in Spain?
- How do I hire and pay a remote contractor in Spain?
- New Option for Expat Freelancers: The Digital Nomad Visa in Spain! (as of 2023)
- What are my tax obligations when paying a contractor in Spain?
- Are there compliance risks when paying contractors in Spain?
- How does Contractor Taxation help you hire remote workers in Spain?
- How does Contractor Taxation help you hire remote workers in Spain?
- FAQs for hiring remote workers in Spain
Why hire remote contractors in Spain?
You can hire remote workers in any country and Spain can be a good location to recruit and hire new talent, particularly for European companies that want proximity to their workers. Spain has temporary or long-term contractors to meet your business needs, both expats and locals. It is an ideal choice if you’re looking for bilingual customer service and sales agents, or you want to hire IT contractors.
How do I hire and pay a remote contractor in Spain?
Once you have found and recruited qualified remote workers in Spain, the next step is to arrive at a method of hiring and paying them across international borders. Payment and contracts are essentially the same for Spanish citizens and foreign nationals, although expats might want payment sent to their home country bank.
1. Hire and pay them as a freelancer
The first option is to hire remote contractors as freelancers or self-employed. This involves setting up a direct contract with all the negotiated compensation and performance terms and then agreeing on a method of remitting payment.
Although this seems straightforward, you have to consider that when contracting across borders there can be some risk if the freelancer does not perform up to expectations. There is no easy way to enforce contract terms as you would within your own country, so some measure of trust is required on both ends. There is a self-employment visa in Spain for freelancers who meet the criteria, and its valid for one year.
2. Engage directly with their limited company
A contractor may also have their own limited company in Spain, that would ‘lease’ the contractor to you. The limited company serves as a business entity and payments and contracts are made through them. This may be slightly more certain than just hiring a freelancer, as a Spanish limited company will likely have its stability and reputation as a business at stake.
A contractor working through their own limited company probably has some history with international clientele, and you might be able to ask for references. In the end, the contract and payment issues are the same, and the limited company will be responsible for all their Spanish tax and business compliance.
3. Hire the remote worker through an umbrella company
Umbrella companies offer a third-party presence in the contracting process and will facilitate payment to the contractor while confirming timesheets or other contract deliverables. Using this option does take the uncertainty out of hiring overseas, as the umbrella company becomes a partner in the foreign country to ensure all contract terms are met for both parties.
This could be especially appealing when hiring an unknown, new freelancer. There is a fee for the service, but the peace of mind for your company may be worth it to avoid any conflicts or misunderstandings. If the contractor is an expat non-EU citizen in Spain, this is probably the only viable option to hire them as the umbrella company would sponsor a work permit. In some cases, the contractor would be a seconded worker of the umbrella company, and entitled to employee benefits in Spain.
New Option for Expat Freelancers: The Digital Nomad Visa in Spain! (as of 2023)
If you are hiring a freelancer, they might be eligible for the new digital nomad visa in Spain. This would simplify the hiring process for certain nationalities who might not have otherwise qualified for a work permit. Remote contractors who wish to reside in Spain and are not EU citizens could fall under this visa. The criteria are as follows:
- The remote contractor must work for non-Spanish companies
- Resident of non-EU country (EU citizens don’t need a work permit in any case)
- Have worked remotely for at least one year prior
- Regularly worked for a non-Spanish company in the past
- Minimum pay of EUR 2000 monthly
- Address inside of Spain
- Must have a current work relationship with a non-Spanish company
There are some real advantages for those contracting in Spain under the digital nomad visa. The original visa is valid for 12 months, but may be expected to allow extensions up to five years. Family is included under the visa, and the tax rate will be 15% for the first four years, compared to the normal 24% rate. When hiring contractors, your company does not have to pay employee benefits in Spain.
As of October 2022 the details of the digital nomad visa in Spain are being finalized for approval. So, if you have remote contractor candidates who are facing visa difficulties this could allow you to hire them more easily. It appears that if your worker is contracting in Spain through their own limited company they could also avail of the new visa.
What are my tax obligations when paying a contractor in Spain?
When you hire an international contractor it is a B2B transaction, and your company only has tax obligations in your home country, with no taxes or contributions due in Spain as with an employee. This is one of the reasons hiring contractors is cost-effective, as long as you avoid misclassification under local labour laws.
A less likely, but possible, company tax obligation would be through creating a permanent establishment (PE), where your contractor’s work activity is generating local revenue, such as concluding sales contracts. That revenue could then be subject to Spanish corporate tax under PE criteria.
Are there compliance risks when paying contractors in Spain?
The primary compliance risk for a foreign company hiring remote contractors in Spain is misclassification. Misclassification occurs when your new contractor is deemed to be an employee in Spain, due to regular, salary-like payments, control of work schedule, or offering benefits.
In that case, authorities might re-classify them as an employee and ask you to set up a local payroll through a legal entity to retain them. The best way to avoid this is to make sure your contractor invoices your company as a sole proprietor or limited company, and maintains an arms-length relationship, with control over their own time and work methods. Using an umbrella company can also minimize this risk for you, or the digital nomad visa in Spain could help as well to confirm contractor status.
How does Contractor Taxation help you hire remote workers in Spain?
Contractor Taxation already has in place experienced Spanish umbrella companies in Spain that can hire your contractors and allow them to start working right away. We can show you how to set up the local contract, arrange payment, and confirm work performance, so there is no uncertainty in the contracting relationship. Our service is focused on contractors only, unlike companies such as remote.com or Deel Spain that primarily handle employee hiring and payroll abroad. Please let us know if we can assist you with hiring remote contractors for your business.
How does Contractor Taxation help you hire remote workers in Spain?
Contractor Taxation already has in place experienced Spanish umbrella companies in Spain, that can hire your contractors and allow them to start working right away. We can show you how to set up the local contract, arrange payment, and confirm work performance, so there is no uncertainty in the contracting relationship.
We also have access to employers of record in Spain, if you decide to hire the worker as an employee, giving you some flexibility in managing cost and commitment. Please let us know if we can assist you with hiring Spanish workers for your business.
FAQs for hiring remote workers in Spain
Compliance Risks When Paying Contractors in Spain
Yes, if the worker has a valid visa and residency they can live in Spain and work remotely for foreign companies. This is where the new digital nomad visa in Spain is helpful for contractors that might want to live and work in the country. The other option for non-EU expats contracting in Spain is to use an umbrella company to sponsor their visa and ensure that they are compliant to hire.
No, the contractor is responsible for filing and paying their own taxes in Spain. A foreign company has no obligation to withhold taxes or make any other contributions. An umbrella company will withhold taxes and social contributions for the contractors, and then issue a net payslip.
Contractors as self-employed do not receive employee benefits in Spain, and your company should not offer benefits. If you did, the contractor might be reclassified as an employee which would increase your compliance obligations dramatically.
If the worker cannot obtain another type of work permit, the digital nomad visa in Spain is a good alternative. If the contractor meets all the criteria, then the visa will ensure they are fully compliant and able to work with your company.
Why Hire Independent Contractors in Spain?
Hiring remote IT contractors is a more cost-effective way to access talent than hiring full time employees. For example, a US company hiring a developer in-house as an employee would mean paying a high salary, benefits and incentives. Hiring an independent contractor in Spain only requires paying an hourly/weekly/monthly rate, localized to the Spanish economy.
Contractors can also be hired for short term projects, and are easily terminated if no longer needed.
Hiring contractors in Spain is a much easier process than hiring employees. A foreign company only has to recruit the contractor and arrive at a pay rate for the contract. The contractor handles all of their own taxes, withholding and other registrations. If a company hires an employee then the foreign firm will have to comply with all Spanish employment laws, often with legal assistance. Contractors are not entitled to employee benefits in Spain, reducing the cost significantly of hiring a remote worker.
How to Hire Remote Workers as Contractors in Spain
You will need to recruit the worker and agree to a contractual rate and position responsibilities. The contractor will probably have a preferred payment method, or may be working through an umbrella company. If the contractor is a foreigner in Spain, you will want to confirm that they have a valid work visa and have met all Spanish self-employment registrations.
The process is simpler for a Spanish contractor as there are no immigration or visa rules to worry about. Because they are citizens you will want to make sure that you do not treat them as employees, and trigger any misclassification criteria. If they filed a complaint, you would have to go through the process of hiring them as an employee, or you would lose the worker.
Contractor Taxation specializes exclusively in hiring contractors, with partners worldwide who use umbrella companies to ensure compliance. Remote.com benefits those companies who are focused on hiring employees, with some ability to handle contractors as well.
Remote.com does offer its remote country explorer which details all the requirements and rules for hiring employees around the world. However, many of those items will not apply to workers contracting in Spain, so the remote.com pricing may not be a good value for a company hiring contractors.
There are many online platforms available for managing remote teams, which would allow your company to monitor their time, activity, use of company software and sales progress. This is really no different than with in-house staff who largely work with sales management software and group interface on the local network.
If your contractor is using the digital nomad visa in Spain, they will handle the application and show that they meet the criteria. You might have to provide the contractor with some proof of your relationship such as a contract for service. Other contractors that need work permits will have to go through an umbrella company, who will arrange all the documents and assist with application.
As the term ‘remote worker’ implies, contractors may be located in remote places in Spain, and all that is required is a stable internet connection. However, many workers contracting in Spain will choose to live in the city for their social life and developed infrastructure.
