The Directorate-General for Taxation (DGT), in its binding ruling V1339-26 of 2 June 2026, analyses the taxation of a worker who is a tax resident in Spain and who provides his services via teleworking for a Portuguese company with no registered office or permanent establishment in Spain.
The DGT concludes that the salary received by the employee is taxable exclusively in Spain, on the grounds that employment is carried out in the place where the employee is physically located whilst performing their work. Therefore, the fact that the employing company is domiciled in Portugal does not, in itself, mean that the income is taxable in that country.
The place where the work is carried out is a decisive factor
To determine the tax treatment of income from employment, the DGT takes into account the actual location where the work is carried out. In this case, as the employee performs their duties entirely from their home in Spain, it is deemed that the employment is carried out on Spanish territory.
This criterion is particularly relevant in a context where it is becoming increasingly common for employees resident in Spain to provide remote services to companies based in other countries.
Is the Portuguese company required to make deductions?
The DGT also comments on withholding obligations. In this regard, it states that the Portuguese company would only be obliged to withhold personal income tax if it operated in Spain through a permanent establishment.
However, this does not mean that the income is exempt from tax: it is the employee themselves who must self-assess and pay the corresponding tax in Spain.
Finally, the DGT clarifies that determining whether the Portuguese company actually operates in Spain through a permanent establishment is a question of fact, which falls within the remit of the State Tax Administration Agency (AEAT).