Foreign employer in Spain: employ directly without a local subsidiary

Are you thinking of employing a team in Spain? Then, the foreign employer in Spain model may be the best choice for you. And that’s because, when registering as one, you don’t need to open a local subsidiary or a branch office in Spain. 

The foreign employer setup avoids all that and allows you to employ legally in the country–in less time and with less investment. All you need to do is register in Spain as a non-resident entity. Now, let’s dive into the details.

What you’ll learn:

• Foreign Employer in Spain: Is it the best for your business?

  Resident vs. Non-resident companies in Spain
  The main advantages of registering as a foreign employer in Spain

• Foreign employer in Spain: Your questions answered

  How do I know this is the right approach for my business?
  Can I hire full-time employees as a foreign employer in Spain?
  Do I need to open a company in Spain to do this?
  How long does it take to register as a foreign employer in Spain?
  What's the difference between a Foreign Employer (FE) and an Employer of Record (EOR) in Spain?
  Can a foreign company hire employees in Spain without a local entity?
  What about the average salary in Spain?
  What obligations must I follow as a foreign employer in Spain?

Foreign Employer in Spain: Is it the best for your business?

When you register as a foreign employer in Spain, you register as a non-resident entity. And you do so to pay taxes and other contributions in the country. This means you don’t need to set up a physical location in Spain and still manage your business expansion from wherever you are.

The concept of a foreign employer is closely linked to the Spanish tax law, as it distinguishes between resident and non-resident companies.

Resident vs. Non-resident companies in Spain

Resident companies are incorporated under Spanish law, have their registered office in Spain, or have effective management and control within Spanish territory. The government taxes these resident entities on their worldwide income. 

On the other hand, non-resident companies—which typically include foreign employers—are generally taxed only on the income they generate from sources within Spain. A non-resident company with a tax number in Spain is a legal entity established outside Spanish territory that runs economic activities or generates income there. 

And there’s a particular tax to pay in that situation.

The Non-Residents’ Income Tax depends on whether there’s a permanent establishment in Spain—meaning a facility or workplace where you run all or part of your business activity.

However, when employing people in Spain as a foreign entity, you must follow a specific set of obligations, mainly regarding payroll and social security contributions.

That means that even if your company's primary tax residency is elsewhere, hiring an employee in Spain triggers responsibilities related to withholding income tax and remitting social security contributions to the Spanish authorities.

All in all, a foreign employer in Spain is a company that doesn't have its main base in Spain but still wants to hire people to work there. So, instead of going through the often long and complicated process of incorporating a company in the country, you can choose the foreign employer route by registering as a non-resident employer there.

And that’s when you can legally hire and pay employees in Spain, manage payroll, and follow all the local labor laws and tax rules.

The main advantages of registering as a foreign employer in Spain

Expanding to Spain can be a bumpy road, but not when you pick the foreign employer alternative. Registering as one comes with many advantages for international businesses like yours. 

Why?

It speeds up the process of finding and hiring people. And that’s all because it’s a much simpler setup than setting up a local subsidiary. It lets you hire talented people in Spain with less time and fewer costs. But that’s not all:

• Directly manage your team: Build strong working relationships;

• Grow your business faster: Get your team up and running quicker;

• Access local talent and operate legally: Hire the best people and stay compliant;

• Skip the hassle of a full subsidiary: Avoid the complexities of setting up a legal entity.

Don’t worry if you still have doubts. Keep reading to find the answers to the most common.

Foreign employer in Spain: Your questions answered

Don’t worry. It’s a simple setup. And it’s easy to understand it. Let’s begin.

How do I know this is the right approach for my business?

First, you must analyze your specific situation. And that’s the best advice we can give you. But generally speaking, the foreign employer model in Spain is great for:

• Organizations that need to hire people directly

• Non-profits that need a direct employment contract

• Companies with remote teams that are hiring in Spain

• Startups or smaller companies testing the Spanish market

• Growing tech companies or businesses that are expanding step by step

Can I hire full-time employees as a foreign employer in Spain?

Absolutely! The foreign employer setup lets you hire employees under standard full-time contracts, just like Spanish companies do. You'll need to follow Spanish labor laws about working hours, benefits, and how to end employment. 

But do remember that while you're legally responsible for your team and all your operations, partnering with a local expert can help you manage these responsibilities effectively.

Do I need to open a company in Spain to do this?

No! And this is one of the biggest advantages!

The foreign employer model means you don't have to go through the process of opening a local subsidiary in Spain. All you need to do is register as a non-resident employer. This lets you meet your obligations as an employer without all the complexities of starting a new company.

This is especially useful if you're just starting in the Spanish market or have a team working in different locations.

How long does it take to register as a foreign employer in Spain?

Generally, registering as a foreign employer in Spain is faster than setting up a new, physical company.

While the exact time can vary depending on your business and how quickly the local authorities process things, you can often get it done in a few weeks. However, you'll need to ensure you have all your paperwork ready, which can also affect how long it takes.

What's the difference between a Foreign Employer (FE) and an Employer of Record (EOR) in Spain?

Knowing the difference between a Foreign Employer (FE) and an Employer of Record (EOR) is important for your business growth. Here’s where they’re similar: both let you hire in Spain without having your own local company—but they handle things differently.

As an FE, your company registers as a non-resident employer with the Spanish authorities and is legally responsible for following the rules and managing employment matters. On the other hand, an EOR becomes the legal employer of your team in Spain, taking care of everything for you—including payroll, taxes, and HR, and ensuring you comply with the law.

Choosing between the two depends on your company's resources, the risk you're comfortable with, and your long-term plans for Spain.

Can a foreign company hire employees in Spain without a local entity?

Yes! As we've discussed, the foreign employer model allows you to do just that by registering as a non-resident employer.

What about the average salary in Spain?

When hiring in a new country, it's natural to wonder what people expect to earn. After all, you’re about to build a brand-new team. 

But the truth is that salaries can vary quite a bit depending on the specific job, the industry, and how much experience the person has. We can tell you that the average annual salary in the tech industry starts at €35.000.

What obligations must I follow as a foreign employer in Spain?

First, you must comply with Spanish Labor Laws and Collective Bargaining Agreements. This includes adhering to regulations on employment contracts, working hours, minimum wage, vacation entitlements, and termination procedures. 

As a foreign employer, you can celebrate any type of contract in Spain. By doing so, you comply with the Spanish legal framework, guarantee the payment of all taxes and contributions, besides avoiding misclassifying workers—which can lead to severe penalties. With that in mind, we advise you to distinguish employees from contractors first and foremost.

Another critical obligation is managing payroll, tax withholdings, and social security contributions. 

Foreign employers are responsible for managing payroll, including withholding income tax and the employee's share of social security contributions—as well as paying the employer's share of social security, unemployment contributions, and other expenses. 

The costs associated with employing in Spain extend beyond salary to include significant employer contributions. Foreign employers must understand the specific rates and regulations for these contributions, which are subject to change.

Finally, foreign employers hiring individuals who aren’t EU, EEA, or Switzerland citizens must get visa or work permit requirements. The employer often has a role in applying for work permits on behalf of the non-EU employee. However, do know that obtaining these permits can be complex and time-consuming, requiring the employer to demonstrate that an EU citizen cannot fill the position. 

Before you go, remember: a foreign employer in Spain is a non-resident entity that employs workers in Spain—meaning you must follow all employment and tax laws under that condition.

Understanding the nuances of tax residency, legal establishment options, and the key obligations related to obtaining a tax number, social security registration, labor law compliance, payroll management, and visa requirements is crucial for any foreign company considering hiring in Spain.