Teleworking and international taxation: key legal issues in 2025
The rise of cross-border teleworking has sparked a highly relevant legal and tax debate: where should workers and companies pay tax when work is performed from another country? In 2025, this issue remains one of the most complex challenges for multinational companies, digital start-ups and professionals who work remotely.
Main tax issues in international teleworking
- Tax residence of individuals: According to Article 9 of Law 35/2006 on personal income tax (Spain), anyone who stays in Spanish territory for more than 183 days or has their centre of economic interests there is considered a tax resident in Spain. If a worker moves to another country, they can change their tax residence even if they maintain a contract with a Spanish company.
- Risk of permanent establishment of the company: Teleworking from another country may mean that the company is considered to have a ‘permanent establishment’ there, in accordance with Article 5 of the OECD Model Convention and bilateral double taxation agreements.
This would require part of the profits to be taxed in that country.
- International double taxation: Working from another country may result in both the country of origin and the country of destination claiming taxes. The solution is to apply the Double Taxation Agreements (DTAs) signed by Spain and most countries.
- Social Security: The displaced teleworker must comply with European coordination rules (Regulation (EC) 883/2004) and bilateral social security agreements. In many cases, it will be necessary to complete form A1 to certify the applicable legislation.
Applicable legislation and regulatory sources
- Law 35/2006 on personal income tax (Spain) – Article 9 on tax residence.
- Law 27/2014 on corporation tax (Spain) – rules on permanent establishments.
- Double Taxation Agreements (DTAs) – based on the OECD Model, Article 15 on income from employment.
- Regulation (EC) 883/2004 – coordination of social security systems in the EU.
- Bilateral social security agreements with non-EU countries (e.g. USA, Mexico, Argentina).
- OECD Model Convention 2017 and Comments updated in 2021 – reference in international taxation.
Practical recommendations
For remote workers:
- Review your tax residence status according to the 183-day rule.
- Check whether there is a DTA between Spain and your country of destination.
- Apply for tax residence certificates to avoid undue withholding tax.
For companies:
- Assess whether teleworking by employees abroad could give rise to permanent establishment.
- Review employment contracts to specify the place of work and its tax implications.
- Coordinate with international tax and human resources advisors before authorising teleworking from another country.
Conclusion
International teleworking has gone from being a temporary measure to becoming a common way of providing services. In 2025, both workers and companies must be aware of the tax and social security implications to avoid the risks of double taxation, penalties or unforeseen costs. The key lies in preventive tax planning, supported by national and European legislation and international agreements.
At SF Abogados, we offer specialised advice on international taxation and teleworking, helping companies and professionals to comply with regulations and optimise their taxation in a globalised environment.
