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Working remotely from Spain as a 'contractor'

An alternative route into an international career without moving out of Spain, working remotely.

Working remotely from Spain as a 'contractor'
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Going independent, the next step in your career?

How many years have you been working in tech? I have spent 10 years as a product designer and frontend developer across several companies. I consider myself senior, but what is the next step I should take in my career? These questions were going round my head last year, when I was still an employee. Many of us know that inside a company the way up is to become a manager or a lead, taking on responsibility for junior professionals and teams, and ending up in more meetings that eat the hours you would rather spend on the work you actually enjoy, replacing them with people management. It is a perfectly valid path, but you have to want it.

What if I told you there is another way to move your career forward? Going independent.

Before writing the first version of this article I ran this poll asking whether you had ever thought about going freelance, becoming a contractor (I explain the difference further down), or, to drop the jargon: working for yourself.

Out of 577 votes, a striking 50% said yes, they had considered it. When I asked why they had not done it, the answer was that their biggest worry was finding clients. The other 50% said no: it had been one of the hardest periods of their professional life, selling themselves is not their thing, they dislike not having paid holidays and, in short, the job insecurity was too high.

Today I am going to tell you about my own experience, entirely subjective, hoping to shed some light for that 50% who do not dare work for themselves because of the risk everyone assumes comes with it.

What actually changes when you work for yourself?

  • More risk: working for yourself carries more financial risk than being an employee, because you are the one who has to find your clients and there may be periods when you do not invoice at all. Risk is the price of independence. But it should not scare you: if you keep it down with the guidelines I describe below and increase what you earn today, it should not be a problem. Bear in mind that Spain is a good country (though not the best in Europe) for taking this kind of risk, because healthcare is good and free. Even as a self-employed professional in Spain you can deduct up to 500 euros a year of private insurance from your income tax. Working for yourself while living in the US, for example, is far riskier, because you would have to carry the large cost of private insurance for you and your family.

  • You open yourself to an international market: As a self-employed professional you can pay tax in Spain while invoicing companies anywhere in the world. That means you can keep living in Spain, with the quality of life that brings, while working for international companies. It is a great way to grow your career without sacrificing your personal life by moving abroad. And I say that as someone who can tell you from experience that living abroad for a few years is the best way to grow as a person, just not at every stage of your life. You will see further down that a common practice among foreign companies hiring fully remote professionals in Spain is to do it through contractors. I work for Apple in California right now, and before that I worked for IBM in New York, all while living in Barcelona.

  • More professional independence:

    • You decide where you work, with whom and when. Some people choose to work nomadically while travelling the world, the so called digital nomads, others only work a certain number of months a year and spend the rest on personal projects or simply on having more life outside work.
    • The equipment you work with is yours. As a contractor the company may give you a computer for privacy reasons, but it is common for you to own your setup: computer, external display, coworking space, chair. For me that is a big advantage, because I can build a workspace entirely to my measure, with ergonomics adapted to the neck problems that years of bad posture at work gave me.
    • Professional independence also means you will not have a company structure around you. Even when you are embedded in one as a contractor, you are always an external professional. For better and for worse. That is why you have to be self sufficient in the services you provide.

  • More tax responsibility: once you start working for yourself you realise how much work sat behind the payslip you used to receive as an employee. You are responsible for invoicing, finances, paying taxes, and you are the one who answers to the tax authority if something goes wrong, even if an accountant helps you with it. My advice is to take on that responsibility actively, understanding which filings and obligations are yours. Do not fall into the trap of delegating everything to an accountant before you understand how it works. Delegate tasks when you are able to supervise them. This tax responsibility will cost you extra unpaid hours, but there are ways to automate it with invoicing software such as Cuéntica, which I recommend for the many reasons I explain in the “Automating the paperwork” section below.

  • More money: If you are thinking of going freelance or contracting for the money, it is true, as a freelancer you can invoice far more than you earn as an employee, especially working for US companies. The reason is tied to opening yourself to an international market, because you have to be aware that salaries in Spain are genuinely low compared with the rest of western Europe or the US. Chaining one contract to the next, or having the same company renew you, is relatively easy. Risk obviously plays a big part in the money you end up making, but if you meet the requirements I set out just below, that risk drops to a minimum.

Would I pay more tax as a contractor (self-employed) than as an employee?

This question comes up constantly. The tax levied on an employee’s work (employment income) and on a self-employed person’s invoicing (business income) is the same income tax, which goes by brackets and depends on your personal circumstances. So we are talking about the same tax.

The biggest difference is that as a self-employed person you can deduct expenses (such as your social security contributions or office equipment) and as an employee you cannot.

Leaving income tax aside and looking at social security: as a self-employed person you pay the full contribution, while as an employee part of it (not all) is paid by the company. When you start a business activity (registering as self-employed) that contribution is reduced for the first months.

On top of that, a very important advantage in my opinion, and one that is rarely taken into account, is that for your first two years as a self-employed person there is a 20% income tax reduction for starting a business activity, up to 100,000 euros.

So we can safely say that in your first two years as a contractor you will pay less income tax than you would as an employee.

On tax matters I always recommend having advisers who can help you. I recommend mine in this section further down.

What do I need to reduce the risk of working for myself?

  • Enough experience to work completely independently, without relying on a team to support you. Even more so when you work for the US, since many of your hours will be asynchronous. If you are junior, being an employee is a better idea than working for yourself, because the company hiring you can give you professional support with a senior profile to mentor you.

  • Enough savings to cover your costs during a few months in which you cannot invoice or your invoices are paid late. It is common for a vendor (I explain what a vendor is further down) based in the US to pay up to 45 days later without that counting as a late payment. Which is not a problem at all if you have a good financial cushion and your invoicing is considerably higher.

  • A strong professional brand, enough to give you visibility and find clients without difficulty. Or better still: to have clients find you. A blog or portfolio and a presence on Twitter are the formulas that have worked best for me. Other professionals use a YouTube channel for it. The community and the network you build through a professional brand matter enormously.

  • If you want to work for clients outside Spain you will need a high level of English. I studied in Finland, where a high level of English is taken for granted and makes no professional difference because everybody speaks it. That is very different from the reality in Spain. If you want to work for foreign companies, and therefore charge higher rates, it is a key skill. However good you are at your job, communication between remote teams is extremely important.

Working remotely for the US from Spain as a ‘contractor’

What is a contractor?

A contractor is a self-employed professional who pays tax in Spain and whom a domestic or foreign company hires full time, 8 hours a day for as long as the contract agreed by both parties lasts. A contractor is more a part of the team than a freelancer: despite being external, they usually have a company email address and access to most internal tools. The end company may also provide a computer, for privacy reasons. Their pay is negotiated by the hour.

The term contractor is widespread in the UK and the US, and much less so in Spain. If a company hires a contractor in Spain it is usually under the figure of the economically dependent self-employed worker (TRADE), a special category. You will not be a TRADE if you work for a foreign vendor.

Contractors differ by the length of the contract:

  • It is very common for an American company that wants to hire you “permanently” and remotely, without you living in the US, to do it through the contractor route. It will not be a permanent contract, because these are long contracts of a year or more, but the understanding is that they renew unless either side says otherwise. This is a legal and normalised method, since it is a simple way to hire someone from another country who does not live in the US without dealing with visas or red tape.

  • If an American company hires you as a contractor remotely for a short period, it is different, because they understand they only have you for the months the contract lasts. They may renew you afterwards, but that does not depend on you alone, it also depends on how the project you work on progresses. On the other hand, the rates you can charge will be higher.

What is a vendor?

A vendor is a company sitting between the end client and you, the self-employed professional, and it appears for one of two reasons:

  • The vendor is the one who finds you contracts. It works as a company that wins projects and offers them to you. It can work in your favour, because you are not the one looking for projects, another company does it for you.

  • If you work for a corporate company, even when that company picked you directly and you did the technical interviews with them, they cannot hire you directly, because only vendors certified by the end company can invoice them. So they will look for a vendor who can invoice them, and you will invoice that vendor. That intermediary company will only deal with you for invoicing and the contract, it is just a bridge, nothing more. Chances are you will never even meet them in person.

Basic rule: the fewer vendors in the chain the better, because remember that they add a markup charged to the end company. That markup varies a lot depending on where the vendor is based. And yes, there can be more than one vendor between the end client and you.

How do you find a remote contractor job in the US?

There are 2 options: You can go through vendors acting as genuine intermediaries, or contact companies looking for contractors directly (even if they later need a vendor to handle the invoicing).

These are some American vendors that will help you find American clients:

How to look for companies that will hire you remotely, directly:

Create a job alert on LinkedIn and Glassdoor with the following criteria:

  • Your preference for remote work: Remote
  • Your skills: frontend, design…
  • And the type of work: Contract

The hiring process

Do I need interviews and a technical test to be a contractor? In my experience with IBM and Apple, yes, I did interviews and a technical test. Again, it depends on the company, but since you work full time there is a hiring process to go through, even if your contract only runs for a few months.

Working out your hourly rate

As a professional independent from the company, you set the hourly price of your services. My rules for pricing each contract are:

  • The value I bring to the company
  • The job market where the company is based
  • The length of the full time contract

What all of us want is to be hired for our talent and not because we come cheap. If you charge according to your value and to the job market where the company is based, you can be sure you are hired for the former. The shorter the contract, the higher you can push the rate, to compensate for the risk. To get a feel for the American job market there are sites such as Glassdoor, which list the salaries of each company’s employees.

If a foreign company wants to hire you long term as a contractor, you may not be the one setting the price: you will have to negotiate it with them. It will look more like an employee’s situation than a freelancer’s. You could even negotiate an annual salary or company stock. All while still working for yourself.

Working remotely does not mean working from home

Many people confuse working remotely with working from home, and they are entirely different things. Working remotely means you can work from wherever you want as long as you put in the hours agreed in the contract and the overlap you agreed for effective communication. We will get to that in the next point. You can of course work from home, but you can also not do that. What works very well for me is working from a coworking space a minute from my flat in the centre of Barcelona. I have a workspace separate from my personal space at home, it is so close that I never feel lazy about going every morning, and I have colleagues and friends there who, even though we do not work on the same projects, bring me a lot of social life and learning, plus contacts. There are many other options, but it is important to decouple these two terms.

Time difference

It depends on the company. In my experience they have asked for an overlap of at least 2 hours a day with the end company, where you can have your daily, meetings, and talk to the rest of the employees. That means that if the company is in New York, as was my case with IBM, the time difference is 6 hours with Spain, so 4pm in Spain is 9am in New York. That schedule is quite comfortable, since it does not clash with a possible 9am to 6pm day. The “problem” (probably not a problem for many) comes with companies on the West Coast, as happens with California: the time difference is 9 hours with Spain, so 6pm in Spain is 9am in San Francisco. That is my current situation with Apple. It means I have to arrange my 8 hours of work so that I am at least available from 6pm to 8pm, and I can organise the rest of the hours however I want.

When you start working as a contractor, forget about paid holidays and other perks, because there will not be any and they do not matter. This does not mean you will not take holidays! Let’s be pragmatic and think in annual earnings: if as a contractor you make more money than as an employee, who cares about paid holidays? You will be able to take unpaid holidays whenever you want and, even though you do not invoice during that time, you will still earn more over the year. You have to think, negotiate a good hourly rate and be pragmatic enough with the numbers, because the money is really in that rate and not in the free piece of fruit your company hands you every morning at the office.

Trips to the US

It depends on the company, but it is also common that, working as a contractor for the US, you fly over there often for work: meeting the rest of the team, internal meetings, conferences. American companies benefit from how cheap flights between the US and Spain are and from not needing a visa between the two countries. You would travel on the ESTA permit and enter the country for “business” reasons, since as an independent professional you are going to the US on a business trip for a very short period: 1 or 2 weeks. The expenses you incur in the US related to your business activity are reimbursed by the vendor through a disbursement invoice you issue when you get back. If you like travelling, it is a very good way to visit the US with expenses paid and meet the team in person. They will of course pay for the hours you work there. Whether they pay for the hours you spend travelling depends on the company.

Tax depending on where your vendor is

If you have got an American company to hire you as a contractor (full time), the next step is to ask where their vendor is. Remember that the vendor is the company you are going to invoice, and which then invoices the end company, and your tax situation changes a lot depending on where you invoice.

If the vendor is in:

  • Spain: the vendor will give you a contract as an economically dependent self-employed worker (TRADE) and you will be paid in euros, since that intermediary company handles the conversion from dollars. The invoices you issue will carry VAT (21%) and a 15% income tax withholding.

  • The United States: you will have a contract with the company but you will be a traditional self-employed worker, without the benefits of TRADE. You will also have to fill in the W-8BEN form the vendor sends you (you can see the instructions in this SelfBank document) so that your US withholding drops to the rate agreed with Spain, since there is a treaty between the two countries, and you will be paid in dollars. Your best option is to have an account with Wise, where they can pay you directly in dollars and you then convert to euros with lower fees than any Spanish bank. The vendor pays less because they avoid an international transfer, and you lose less money in the conversion. The invoices you issue will have no VAT and no income tax withholding, and you will have to declare them in euros even though you are paid in dollars, converting the currency on the day you issue them. To make issuing an invoice in dollars and recording it in euros easier, Cuéntica has a new feature that does it automatically and is fully compatible with Verifactu. Since you will not apply any income tax withholding on your invoices, you are required to file the quarterly form 130 and pay a 20% withholding on your invoicing. As you can see it is slightly more involved, but it should not be a problem.

Automating the paperwork

When I started out as self-employed I hired a traditional accountant to help and guide me with invoicing. I soon realised I was delegating the entire process, with no transparency and with the risk that the person assigned to me made a human error, since I depended on her for every single task, however small, such as recording an invoice. So I started looking for a more effective, automated, transparent way of reducing human error through automation. That is when I moved to Cuéntica, an online accountancy I had known about through recommendations for years, which provides a way to generate and record both issued invoices and expenses in a web application, adapted to the new Verifactu invoicing rules I talk about further down. Because they hold the data from those invoices, they can generate the forms the tax authority asks of you based on that information. Once generated, you can file them yourself with your digital certificate or they can do it for you.

This article, for instance, exists thanks to everything I have learned as a customer of Cuéntica, since they guided me from the start through all the tax questions around clients outside Spain and the special cases we contractors run into.

A company wants me as a contractor, how do I start?

The first thing you have to do is sign the contract that company gives you, check whether you need to complete a form exempting you from double taxation, such as the W-8BEN in the US (that depends on the country you invoice), and then register as self-employed so you can invoice.

I recommend talking to Cuéntica so they can handle your self-employment registration and guide you through the day to day. And if you are already self-employed, tell them I sent you, they are lovely people and it would personally make me happy to know you have started working with them.

Contractor but not self-employed: could I be an employee?

Many people ask me whether there is a way to do this without being self-employed, because they want to be employees. We talked earlier about the tax difference, but being an employee has other advantages, such as not carrying your own social security contributions, getting better terms on a mortgage, or simply more peace of mind. It also costs the company hiring you more, which can affect what you end up earning. Let’s look at the options.

To be an employee you need to be hired by a Spanish company. That makes sense, since the company hiring you needs to be able to pay your income tax withholdings and social security contributions in Spain. There are 2 options:

  • The end company has a Spanish entity: the company that has had you as a contractor for months or years may want to formalise the relationship by hiring you full time, if it has a Spanish entity. That is how Apple, after hiring me as a contractor in 2020, hired me as an employee through its Spanish office in 2021. This is a decision for the hiring company and it depends on how many people it has in Spain and whether it wants to invest in a legal and tax team here.

  • The end company has no Spanish entity: opening one in Spain to hire a single person would make no sense, since the maintenance costs and the tax knowledge required would not be worth it. But there is an alternative: Employer of Record (EOR). This is a service by which an intermediary company in Spain hires you as an employee and invoices the cost of employing you to the end company you work for. The fee for hiring through an Employer of Record used to be very expensive, since employing people means risk, advancing payments and running payroll. On top of that, the social security contribution a company pays for a worker is higher than the one a self-employed person pays, since the contribution base depends on the salary. The high cost of hiring through an EOR is the main reason end companies do not usually choose this option. But if, when the contract is negotiated, the hiring company is willing to take on those extra costs so that you are an employee in Spain (as in cases that have reached me by email), I recommend doing it with Native Teams. It is the Employer of Record I have found with the most affordable rates and a very good service. Much cheaper than alternatives such as Deel or Remote. I leave you my Native Teams referral, but you can also write me an email with any questions and I will put you in touch with them directly.

What is new with Verifactu

Since I published this guide, the Spanish tax authority has introduced something new: Verifactu, the regulation setting out what your digital invoices have to look like. Verifactu establishes technical requirements so that the invoices you issue are unalterable, traceable and verifiable. The software you use to generate invoices must be certified and adapted to meet those standards, so you can no longer use a spreadsheet or a program that has not been adapted to Verifactu. Cuéntica has a very complete guide to Verifactu explaining every detail, but these are the key points:

  • Verifactu is mandatory for every self-employed person resident in Spain (contractors included), except those living in Navarre or the Basque Country, which already have a similar system. It also applies to contractors invoicing clients outside Spain.
  • The official date for self-employed people to start using Verifactu is 1 July 2027, but it is recommended to start as early as possible with an adapted tool, so that all your invoicing is already unified.
  • Even though the tax authority will have your invoicing data instantly, you still have to file the same tax forms, since the automation only covers invoicing, not the rest of your bookkeeping or your tax returns. It does not replace the obligation to file quarterly and annual returns.

How do you adapt to Verifactu? The most important thing is to make sure your invoicing software is adapted to Verifactu. You can ask them for the declaration certifying it.

The tax authority’s new free tool is already available, but it is only recommended for low invoicing volumes and for people who cannot buy software for the purpose. Like other free software, it includes no technical support and no tax advice.

You do not need to change invoicing tool if you already have certified software, but I recommend Cuéntica for several reasons:

  • They are experts in contractors. Since I wrote this article, I know they have worked with hundreds of contractors across Spain.
  • They are certified software for Verifactu and they know the regulation very well. In fact they were adapted from day one.
  • They let you handle not only invoices but all of your bookkeeping, and they help you with every tax form (which still exist).
  • If you need to register as self-employed, they can take care of that too.

Conclusion

Working as a contractor for American companies in tech can be an alternative route into an international career that brings you more money and more prestige without moving out of Spain, working remotely. On top of that, working with foreign companies lets you charge higher hourly rates, since they tend to pay better than Spanish companies, which keeps the risk down.

Any questions?

You can write me an email at marina@marinaaisa.com or a DM on Twitter. As I update this article, 4 years have passed since I published it and I have received more than 2000 emails and private messages from you about it, all of which I have tried to answer personally, with care and with real delight that there is so much interest in the subject.

I hope I have been able to help, and congratulations on the career push you are about to make.