Teleworking and the risk of a permanent establishment

The Spanish General Directorate of Taxes (GDT) in a recent binding consultation, has concluded that the stay in Spanish territory, during the pandemic, of an employee of a non-resident company, in a home office through teleworking, would not imply a permanent establishment in Spain.

The GDT is based on the OECD report that includes several non-binding guidelines that governments must adopt in relation to the exceptional situation that taxpayers may face due to the pandemic. The novelty lies on the fact that, as opposed to a previous binding consultation, the GDT does conclude in line with the OECD guidelines and clarifies the cases where a permanent establishment may exist in Spain.

✔ The GDT analyses a case of an employee of a company resident in the UK that was in Spain in March 2020 and, due to the COVID19 pandemic, he was temporarily retained in Spanish territory. Once the lockdown concluded, he decided, unilaterally and for personal reasons, to remain in Spain. In these circumstances, he remained in Spain more than 183 days during the calendar year 2020, working on a remote basis.

✔ The following assumptions must be differentiated:

A. During the months that the health measures remained in force:

  • The fact that the employee was working from home does not imply a sufficient level of permanence to consider the existence of a permanent establishment of the company in Spain.
  • Hence, during that period, the GDT considers that the use of a home office by the employee in Spain is discontinued and incidental.
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B. After such months:

• If the employee continues working from his home after the cessation of the public health measures imposed or recommended by the government, it could be considered that such home office has a certain degree of permanence. However, even in such a case, it would be necessary to determine whether the home office is at the employer’s disposal after a permanent change in the type of the services rendered by the employee. The GDT concludes that the office is not at the disposal of the employer, based on the following circumstances:

  • That the employee unilaterally decides to continue in Spain, when the measures that prevented him from leaving the country have disappeared.
  • That the employer has at the employee’s disposal a place that allows performing the work on-site in the UK, and therefore has not required the employee to work in his home office.
  • That the employer does not pay any expenses or special remuneration to the employee for the use of his home to carry out his work.

✔ Regarding the possible existence of a permanent establishment for considering the employee as a dependant agent, it is concluded that, while the public health measures were in force, there was not sufficient habituality in the exercise of the powers that the employee may have been granted to consider that the employee is a dependant agent of the company. If such stay was extended, it must be considered that the existence of a permanent establishment is a question of proof, based on the concrete facts and circumstances that will need to be analyzed on a case-by-case basis.

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✔ In conclusion, if the habitual circumstances of the work developed by the employee for the company did not give rise to a permanent establishment, it is difficult to conclude that there will be a change due to the exceptional and compulsory context of the Covid19 crisis during three months in Spain. However, if the permanence in Spain is extended, it will need to be analyzed in each case whether the facts lead to the conclusion that a permanent establishment exists.


Publicado el 05-2022 por PBS