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January 28, 2022

Spainís Tax Authority issues ruling on remote workers and permanent establishments during and after COVID-19 restrictions

Executive summary

The Spanish General Directorate of Taxes (GDT) recently issued a ruling (not yet published) confirming that the presence of an employee working remotely from home during the COVID-19 crisis and after the termination of public health measures will not result in a permanent establishment (PE) in Spain, under certain circumstances, following the application of the relevant tax treaty provisions.

This ruling is the first ruling to provide certain guidance, following Organisation for Economic Co-operation and Development (OECD) standards, on remote workers and PE assessment not only during the COVID-19 lockdown but also following the end of travel ban measures.

Detailed discussion


The consultant (the UK Company) is an entity resident in the United Kingdom (UK), that is part of a multinational group with a presence in several European countries.

The employee is an English national, resident for tax purposes in the UK, who worked in London for the UK company. Such employee exercised a senior role and his functions were not preparatory or ancillary in nature. However, the employee did not have sufficient authority to sign contracts for and on behalf of the UK Company and was not in charge of a team.

This employee travelled to Spain on holidays and on weekends and was unable to leave Spain due to the COVID lockdown.

The employee continued to work for the UK Company from his home, without any change in his work while in Spain.

Once the lockdown and travel ban were lifted, the employee unilaterally decided, for personal reasons, to remain in Spain. The UK Company requested the employee to work from the UK in the last quarter of the year 2020. The employee refused and resigned.

The employee spent more than 183 days in Spain during the calendar year 2020, becoming a Spanish tax resident.

The UK Company did not bear any costs of the home office and did not factor in his stay in Spain for purposes of the employee's remuneration. Also, after the lift of public health measures, the employee had the UK Company's London office at his disposal.


The UK Company asked for confirmation of its interpretation that no Spanish PE is deemed to exist in Spanish territory in 2020 by application of either the fixed place of business clause or dependent agent clause.

With respect to the fixed place of business clause, the GDT distinguished between two situations: The employee's stay during COVID-19 restrictions and the employee's stay after those restrictions:

During COVID-19 lockdown and travel ban

The GDT addresses this matter expressly referring to the updated guidance on tax treaties and the impact of the OECD COVID-19 pandemic report.1

The GDT concluded that during the COVID-19 pandemic, individuals who stay at home to work remotely are doing so by an extraordinary event, not an enterprise's requirement. Therefore, considering the extraordinary nature of the COVID-19 pandemic, teleworking from home during the lockdown and travel ban would not create a PE for the business/employer, because such activity lacks a sufficient degree of permanency or continuity.

After COVID-19 lockdown and travel ban

The GDT also analyzed whether the home office may constitute a PE after the cessation of public health measures, since the individual continued to work from home. In that context, a further examination of the facts and circumstances would be required. For a place where the activity of the company is carried out to be considered as a PE, it must have a certain degree of permanence and also it must be at the disposal of the company:

  • The GDT did not expressly conclude on whether the stay in Spain was fixed or lacked the relevant degree of permanence. The GDT highlighted that while during the lockdown, the stay in Spain was incidental, the employee stayed in Spain more than six months in 2020.
  • Unlike previous rulings, the GDT expressly referred to the different OECD Commentaries' criteria on whether a home office is at the disposal of the nonresident employer.

In the case at hand, the GDT considered that the employee's home office was not at disposal of the UK Company for the following reasons:

  • The activity previously performed by the employee did not change as a result of his movement to Spain.
  • Moving to Spain was a pure personal decision, and the UK Company did not require or ask the employee to move to Spain for a specific business reason.
  • The UK Company did not bear any cost triggered by the employee stay in Spain.
  • The UK Company has an office in the UK which could have been used by the employee to develop his daily work without the need to be in Spain.

Dependent agent

The GDT did not elaborate on this topic since the activities of the employee could not be identified with those of an agent.


PE risk is a very casuistic topic and requires an ad hoc analysis considering all facts and circumstances, so a detailed analysis is always recommended to properly assess the level of PE risk derived from employees working remotely from Spain.

This is the first ruling that expressly refers to OECD Guidance, stating that teleworking from home (i.e., the home office) because of an extraordinary event or public health measures imposed or recommended by a government would not create a PE for the business/employer during that time because such activity lacks a sufficient degree of permanency or continuity.

Also following OECD Guidance, the GDT confirms that if the remote worker continues teleworking from home once the lockdown and travel ban are lifted, the teleworking may imply a certain degree of permanence and further analysis must be done of the relevant facts and circumstances.

Previous rulings on a home office did not clearly enter into the detail of the criteria described in the OECD Commentaries. This is the first ruling in which the GDT confirms that a home office is not at disposal of the nonresident employer when it is set up in a home, the cost of having an employee in Spain is not borne by the nonresident company and when the decision to move to Spain was driven by personal reasons of the employee rather than any business and/or strategy reasons, expressly confirming alignment with OECD standards.

The Spanish tax authorities are required to apply this criterion to any taxpayer with facts and circumstances identical to those described in the ruling.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Abogados, Madrid

Ernst & Young LLP (United States), Spanish Tax Desk, New York



1 Guidance published by the OECD about unprecedented measures imposed or recommended by governments, including travel restrictions and curtailment of business operations, have been in effect in most jurisdictions in various forms and stages during most of 2020 due to the COVID-19 pandemic and this situation continues in 2021.