Fraud Blocker Non-Residential Payroll in Spain - Parakar

Non-Residential Payroll in Spain

A Strategic Alternative to EOR and entity setup

At Parakar, we understand that expanding your business into a new country can be a complex endeavor, marked by regulatory challenges and financial obligations. In Spain, for instance, establishing a limited liability company requires a minimum share capital of 3.000 euros, accompanied by accounting responsibilities, making it a demanding process.

In certain cases, the widely-used Employer of Record (EOR) / consultancy model may not align with your specific needs. Moreover, in certain cases, employees prefer direct employment with the ultimate employer rather than being engaged through a labor leasing company.

The strategic approach: Non-Residential Payroll (NRP)

Non-Residential Payroll (NRP) emerges as a clever solution for businesses aiming to establish a foothold in Spain without committing to a permanent establishment. It offers a unique opportunity for foreign employers without an in-country foot print to engage in “payroll-only” registrations with local tax and social security authorities, enabling them to manage a local payroll without having to go through all the administrative procedures to establish a legal entity in Spain and without the several compliance requirements that come with it.

Advantages of NRP

  • Speedy registration process: NRP registrations typically take 3 to 4 weeks, depending on factors like industry and ownership structure, making it a quicker alternative to setting up a limited liability company.
  • Cost-efficiency: For businesses with only a handful of employees in Spain, the cost of establishing a legal entity may outweigh the benefits. NRP eliminates the need for share capital and annual accounting costs, reducing setup expenses.
  • Direct employment: Under NRP, the parent entity can directly employ foreign workers without the need to establish a legal footprint in the host country, offering flexibility and control and also allowing employees to have an employment contract with the direct employer.

NRP’s Limitations

  • Bank account: A Spanish bank account is required for payments related to social security and tax authorities. Securing a Spanish bank account can pose challenges for non-resident companies. Nevertheless, Parakar has experience in this area and can assist you in the process of opening an account. Additionally Parakar can offer payment services via its partners in Spain.
  • Risk of permanent establishment: With an increasing number of employees or certain job positions, there is a risk of being deemed a permanent establishment in Spain, which may result in further obligations and tax liabilities, for instance, in case the director of the company turns out to be the employee in Spain. A director who is authorized to represent the company can be deemed by the Spanish tax authorities as the permanent establishment of that company.

Additionally, other managerial or sales roles which allow the employee to represent the company and to close negotiate and closed deals on behalf of the company, can also pose a risk for permanent establishment.

Non-Residential Payroll (NRP) presents an appealing option for businesses seeking to navigate the complexities of the Spanish business landscape. It provides a practical and quicker solution to be able to employ in Spain without the full commitment of a legal entity. However, it is essential to weigh the advantages and limitations carefully and consider seeking expert guidance to make an informed decision that aligns with your business objectives. At Parakar, we are here to support and guide you through every step of the NRP journey, ensuring compliance and success in the Spanish market.

Book your consultation with our sales and business development team to see which options are best for your business and employees journey in country.

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