International Remote Work: Legal and Tax Considerations

International remote work has become an everyday reality for thousands of professionals and companies around the world. Driven by technological advances and accelerated by the pandemic, this working model has broken down traditional physical borders, allowing employees to perform their duties from anywhere on the planet. However, this geographical freedom also raises significant legal, tax, and administrative questions that cannot be overlooked.

In this article, we address the key aspects that must be considered when implementing or accepting an international remote work arrangement, both from the employee’s and the company’s perspective. In addition, last Tuesday, May 27, in collaboration with the British Chamber of Commerce in Spain, we held a webinar on international remote work in spanish. Our Talent and Mobility expert, Iván Boumakhrouta, explained in less than 60 minutes everything companies need to know about this topic.

What is considered international remote work?

In the absence of official regulation, we could define international remote work as a contractual employment activity carried out using information technologies from a country other than where the company is headquartered. This model is also characterized by the following key aspects:

• It is an activity carried out 100% remotely.
• It does not involve performing effective work in the employee’s country of residence for the employing company.
• The employment contract is not established in the employee’s country of residence, but directly with the company in its country of headquarters.

Differentiating international remote work from secondment

If a professional is temporarily transferred by their company to another country to carry out a specific professional activity for a limited period for a company located in that State, we would be referring to an international secondment rather than international remote work. These are two scenarios of a different legal nature and therefore with different legal effects. They are two distinct realities with different regulations:

1. The international secondment is driven by the company, includes an essential element of temporariness, and the results of the work benefit the host country. This figure is necessarily regulated: at EU level through the Social Security Regulations and the Posted Workers Directive; outside the EU through international social security agreements and each country’s own immigration legislation.
2. In international remote work, the change in the place where the work is performed responds to the professional’s own interest, and it is irrelevant where the work is carried out, as the nature of the services does not change. Moreover, as it is not linked to a specific service, it does not necessarily imply temporariness. As a result, the directives governing the posting of workers do not apply to international remote workers.

Can I legally work remotely from another country?

One of the first points to review when an employee works from outside the country where the company is headquartered is regulatory compliance.

Remote work within the European Union

Although the Schengen Area allows the free movement of workers, it is essential to consider the nationality of the remote worker. EU/EEA citizens generally do not require work permits to work remotely in another Member State, but they may need a registration certificate if their stay exceeds a certain period (usually three months), depending on the regulations of the host country.

Remote work outside the European Union

In non-EU countries, the applicable regulations will be those specific to the country in question. We can identify two main scenarios:

• Countries with specific regulations for remote workers: Many countries, including Spain, have implemented specific residence permits for foreign remote workers, commonly known as “digital nomad visas“.
• Countries without specific regulation: In countries that have not yet developed specific legislation for international remote work, remote workers often enter as tourists or with residence permits that do not authorize economic activities. In most of these cases, the company may need to establish a presence in the country in order to hire the employee locally and comply with legal requirements.

In the webinar, our Talent and Mobility expert, Iván Boumakhrouta, explains how to apply for a digital nomad visa. He also discusses practical cases such as nationals returning to their home country to work remotely while employed by a foreign company.

Where must the remote worker pay social security contributions?

As a general rule, remote workers are required to contribute to the social security system in the country where they reside and effectively perform their work, even if their employer is foreign. However, there are mechanisms to coordinate the systems of different countries:

EU Regulations

In response to the rise of remote work, the European Commission established a framework for applying these regulations to cross-border remote workers. Since 2023, the European framework agreement allows:

• Maintaining contributions in the country of origin: Workers may continue contributing in their country of origin for a maximum of 24 months.
• Continuing to contribute indefinitely in their country of origin if remote work represents less than 50% of their total activity.
• In exceptional circumstances or cases of force majeure, the 24-month period may be exceeded.

For long-term arrangements, it is advisable to request the transfer of entitlement to healthcare through the S1 certificate, which allows the worker and their family members to receive medical care in their country of residence as if they were insured there, even though contributions are paid in another State.

Bilateral agreements outside the EU

Spain has bilateral Social Security agreements with numerous non-EU countries to prevent double contributions or lack of protection for posted workers. However, they present certain challenges:

• Outdated regulatory texts: Many of these agreements are quite old and do not explicitly address remote work.
• Processing times: Obtaining coverage certificates or official decisions may take several months.
• Nationality exclusions: These agreements often cover only nationals of the signatory countries.
• Incomplete coverage: Access to certain benefits, such as healthcare, is not guaranteed under all agreements.

Countries without an agreement

In the absence of an applicable EU Regulation or bilateral agreement, the worker will generally be subject to the local legislation of the country from which they are working remotely. This implies:

• Obligation to contribute locally: Both the worker and the company must comply with the affiliation and contribution regulations of the employee’s country of residence.
• Need for company presence: It is highly likely that the company will need to establish some type of legal presence in that country (branch, subsidiary, or registration as a foreign employer) in order to hire the worker locally and comply with social security and tax obligations.
• Exceptions: Some countries may have exceptions or special regimes for international remote workers, although this is not the norm.

Where does the remote worker pay taxes?

Taxation is one of the most complex aspects and requires a thorough analysis of each employee’s personal circumstances and the company’s operating model. The main elements to consider are:

Worker’s tax residence

Tax residence determines where the worker must pay taxes on their worldwide income. Generally, a person is considered a tax resident in a country if they remain there for more than 183 days during a calendar year, or if their main center or base of activities or economic interests is located there.

Double Taxation Agreements

Double Taxation Agreements are designed to prevent the same income from being taxed in two different countries (the worker’s country of residence and the source country, if different). If the remote worker performs their activity from their new country of residence, that country will generally have the right to tax that income.

Special regimes for foreign nationals

Some countries have special tax regimes for foreign workers or inbound employees, which may offer certain tax advantages for a specific period. It is important to assess whether such regulations exist in the remote worker’s destination country.

Withholding obligations for the company

The employer may be required to withhold personal income tax in the country where the employee is working remotely, particularly if the company is deemed to have some form of presence or permanent establishment in that country, or if local legislation imposes such obligations on foreign employers with resident employees.

What does having a presence in the country imply?

When we refer to company presence in a country, this does not necessarily mean operating effectively there. There are two types of presence:

• Permanent Establishment (PE): Presence in the country for hiring purposes, payment of social security contributions, and tax withholdings, without carrying out effective business activity.
• Representative Office (RO): A registered office in the country with real activity in the territory, operating effectively and paying taxes on profits.

✅ International remote work requires a thorough assessment of immigration, employment, tax, and social security aspects related to international workforce mobility. Request our international mobility services and let us help you.