However, at a certain point this activity may create a tax presence.
A tax presence means that the local tax authorities consider your business as local enough to tax you — even if you have no legal entity, branch, or registration. In tax treaties this is called a permanent estabishment, but the concept is broader.
If your activities create a tax presence, this can trigger obligations such as:
corporate income tax on locally attributable profits
local bookkeeping and reporting requirements
registration with tax authorities
penalties or retroactive tax assessments if risks are missed
The difficulty is that tax presence is not always obvious.
Many companies assume that “no company” automatically means “no tax”, which is not always correct.
Tax presence risks often arise when a company:
has employees or directors working from another country
uses local sales agents or representatives
carries out long-term projects or on-site activities
operates warehouses or fixed facilities
manages local operations from a home office
Whether these activities create a tax presence depends on how authorities apply these tax rules in practice.
Tax presence issues in Spain are handled in a relatively assertive enforcement environment with strong reliance on factual substance.
Audits, assessments and treaty interpretation are carried out by the Spanish Tax Agency (Agencia Estatal de Administración Tributaria, AEAT), which has extensive experience with permanent establishment disputes involving foreign companies (link).
Disputes are resolved through the Spanish tax courts and ultimately the Supreme Court (Tribunal Supremo), whose jurisprudence has significantly shaped Spain’s approach to permanent establishment and dependent agent cases (link).
In practice, Spain is regarded as one of the more proactive EU jurisdictions in asserting tax presence, particularly where sales, digital activities or people-based operations are involved.
Spanish tax treaties generally follow the OECD model, but Spanish courts have historically applied a broad and substance-oriented interpretation of permanent establishment concepts.
The AEAT places strong emphasis on whether activities performed in Spain form an essential part of the foreign enterprise’s business, even where contracts are formally concluded abroad.
Spain has built a substantial body of case law on commissionaire and dependent agent arrangements, often taking a position that goes beyond formal contractual analysis.
In several Supreme Court decisions discussed in professional commentary, Spanish courts have held that Spanish-based entities or agents may constitute a permanent establishment where they play a decisive role in negotiating or effectively concluding contracts for a foreign principal, even if signature authority formally lies abroad (link).
A well-known example is the Spanish litigation involving commissionaire and sales support structures in the pharmaceutical and technology sectors, where the courts focused on the economic reality of the sales process rather than on the formal allocation of contractual risk.
Following the OECD BEPS changes, Spanish authorities have been quick to rely on the “principal role leading to the conclusion of contracts” concept in audits and assessments.
Remote work and home office arrangements are increasingly scrutinised in Spain, particularly where they are permanent and operationally significant.
Spanish administrative guidance and case law indicate that a home office may be regarded as a fixed place of business where it is used on a continuous basis for core business activities and is effectively at the disposal of the foreign employer (link).
Occasional or convenience-based remote work is generally viewed as lower risk, but structurally embedding key functions such as sales management, technical leadership or operational coordination in Spain materially increases tax presence exposure.
Scrutiny by Spanish tax authorities typically increases where local personnel are involved in negotiating or shaping commercial terms, where sales support activities are closely linked to revenue generation, where activities are presented as auxiliary but are essential to the business model, or where remote work becomes permanent and functionally central.
Spanish audits tend to take a holistic view of the business, with strong emphasis on how value is actually created and monetised.
If tax presence is established, Spain may assess corporate income tax on profits attributable to Spanish activities, often accompanied by detailed profit attribution and transfer pricing documentation requirements.
Retroactive assessments are common, and penalties can be significant, particularly where the authorities conclude that the structure was designed to avoid Spanish taxation.
In Spain, incorporation often becomes the cleaner option once sales or commercial decision-making functions are exercised locally, when local teams play a decisive role in contract conclusion, when operational substance is permanently embedded in Spain, or when ongoing audit risk outweighs the flexibility of operating without a formal entity. At that stage, incorporation typically provides greater legal certainty and reduces exposure to prolonged disputes with the tax authorities.
Across tax systems, the assessment of tax presence typically follows a consistent set of underlying principles:
Substance over legal form
Actual business activities and economic reality carry more weight than contractual labels or formal structures.
People and decision-making
Where key individuals work, negotiate, manage operations or make decisions is often decisive.
Continuity and regularity
Ongoing or recurring activities are treated differently from occasional or incidental involvement.
Economic value creation
Where value is created, managed or controlled is a central factor in tax attribution.
These principles explain why the absence of a legal entity does not automatically eliminate tax exposure.
Tax presence risk is most commonly associated with the following types of activities:
Employees or directors working structurally from another jurisdiction
Sales personnel or agents with decision-making authority
Long-term or recurring on-site projects
Fixed places of business such as offices, warehouses or workshops
Home offices used as a regular base for business operations
The decisive factor is rarely a single activity, but rather the combination, duration and functional role of these activities.
Certain activities are widely regarded as preparatory or auxiliary and typically do not, on their own, create tax presence:
Occasional business travel
Pure marketing or promotional activities
Independent agents acting in the ordinary course of their business
Short-term presence without operational continuity
Supporting functions without decision-making authority
Risk may still arise when these activities evolve or are combined with more substantive functions.