Remote work, a new way of working currently on the rise due to the current health crisis, which can lead to conflicts of tax residence when the country from where the work is carried out remotely is different from the country where the payer resides, for which generates certain doubts in the subjection of those returns between states.
A recent query from the General Directorate of Taxes (V0194-21) sheds some light on the doubts generated by this new way of working. The consultation studies the case of a natural person, whose payer resides in the United Kingdom, requiring him to be present in that country for a minimum of days, but he usually resides in Spain, where he carries out his work remotely. According to the regulations of each state, he can be considered a tax resident in both countries.
The consultation differentiates the income from work received depending on how it was obtained. Those obtained by the work carried out in the country where the payer is located, differentiating them from those obtained by teleworking carried out in Spain.
The consideration of tax residence in the same country where the payer resides, or, conversely, the determination of his tax residence in Spain, will determine the power of the paying country to be able to consider such remunerations as subject.
The consultation foresees both cases, firstly, the consideration of tax resident in Spain, where, using the Model Agreement of the OECD, it is established that the work carried out will be understood to be carried out where the employee is physically present and cannot be subject to tax in the status of the source of remuneration.
On the contrary, in the case of considering him a tax resident in the same country where the payer resides, for work carried out remotely from Spain, both countries have the shared power to tax that income, where the agreement to avoid double taxation signed between countries will set the double tax elimination mode.
As we can see, the DGT determines that the returns obtained “remotely”, according to the territoriality criteria, regardless of where the payer resides, may be taxed in the country from where the work is carried out remotely.