Under Spanish employment law, whether the posting of an employee takes place within the European Union or if it involves a third country is key.
Regarding EU Member States, given the freedom of employees, there is no obligation to obtain work permits. However, regarding Social Security, an A1 certificate under the Social Security system’s applicable law shall be filed. In this scenario, the employee continues to be subject to the legislation of the first Member State for 24 months, which could be extended for an additional 36 months (depending on the particular Member State).
When posting employees to countries outside the EU, relevant work and residence permits must be applied for in accordance with the applicable local laws. Regarding Social Security and health care, these will depend on the specific case, i.e. whether a bilateral social security agreement has been entered into between the countries.
In any case, mandatory local employment laws applicable to both affected companies shall be observed during the posting. Likewise, in order to minimise future risks, it is highly advisable to enter into an international allocation agreement, establishing the terms and conditions applicable to the posting.
From a tax perspective, Spain’s Personal Income Tax Act establishes a special regime applicable to non-resident individuals who acquire Spanish tax residency. Said regime will apply during the fiscal year in which they acquire said residency and throughout the subsequent five years.
The requirements for applying said regime imply that the individual: (a) must not have been a Spanish tax resident during the preceding ten fiscal years; (b) must have moved to Spain due to an employment contract or to assume the role of director in a non-related company; and (c) may not obtain income classified as being obtained by a permanent Spanish establishment.
Under said regime, individuals would be only taxed on their Spanish-sourced income (except for their salary, which is taxed on a world-wide basis).
In particular, a fixed tax rate (i.e. 24%) would apply to the first EUR 600,000 obtained by the individual as employment income, with any excess taxed at 45% (tax exemptions and reductions would not apply).
Dividends, interests and capital gains obtained in Spain would be taxed at the following rates:
- 19% for the first EUR 6,000;
- 21% for amounts between EUR 6,000.01 and EUR 50,000;
- 23% for amounts exceeding EUR 50,000.