Contractor compliance in Spain is governed by two bodies of law operating simultaneously. The Estatuto de los Trabajadores (ET, Art. 1.1) defines employment through two criteria: dependencia — working within the principal's sphere of organisation and direction — and ajenidad — performing work for the account of another, where the principal bears the economic risk. A contractor relationship that satisfies both criteria is a disguised employment relationship regardless of its contractual label. A middle category exists: the TRADE (trabajador autónomo económicamente dependiente) under Ley 20/2007 (LETA, Art. 11), covering contractors who invoice at least 75% of their income to one client but retain genuine operational autonomy, own infrastructure, and no employees. For the contractor's own tax position, Spanish law applies separate VAT and IRPF obligations depending on whether clients are Spanish, EU, or non-EU.
Under the primacía de la realidad doctrine (Tribunal Supremo), courts assess how the relationship operates — not the contract's label. A contractor working fixed hours under daily instructions from a single client is likely reclassified regardless of any invoice.
Source: ET Art. 1.1 (RDL 2/2015); LETA Art. 11 (Ley 20/2007)
Employed or Self-Employed? The Legal Tests That Matter
Spain's employment law does not allow the parties to a services contract to choose which legal regime governs their relationship. The classification is determined by the economic reality of how the services are provided — not by the agreement's name, structure, or the invoices it generates.
The two criteria under ET Art. 1.1
Under Art. 1.1 of the Estatuto de los Trabajadores (RDL 2/2015), a labour relationship exists whenever services are provided voluntarily, for remuneration, within the "scope of organisation and direction" of another party (dependencia) and "for the account of" that party (ajenidad). Both criteria must be present — but in practice they tend to co-exist.
Dependencia is present when the contractor works under the principal's instructions: following set hours, submitting to oversight, receiving day-to-day direction on how to carry out the work, or integrating into the company's operational structure. It does not require a formal employment hierarchy — courts look at practical control.
Ajenidad is present when the economic result of the work belongs to the company, not the contractor. If the contractor does not bear the risk of the outcome — if the fee is fixed regardless of results, if the tools belong to the client, if there is no market exposure — ajenidad exists.
When both are present, the relationship is a labour relationship irrespective of the contract's label. The Tribunal Supremo (Sala de lo Social) has applied this rule consistently, including in cases where workers had signed agreements explicitly confirming their autonomous status. The doctrine — primacía de la realidad (reality over form) — is confirmed in the Glovo ruling (STS 25-9-2020) and applied repeatedly by the Sala de lo Social.
The TRADE category — halfway house or genuine alternative?
A TRADE (trabajador autónomo económicamente dependiente) is a self-employed contractor who derives at least 75% of professional income from a single client yet operates with genuine autonomy. The TRADE status is defined in Ley 20/2007 (LETA), Art. 11, and requires all of the following conditions simultaneously.
At least 75% of professional income comes from a single client. The contractor has no employees and does not subcontract the work. The contractor has its own productive infrastructure and equipment, independent from the client's. The work is carried out with its own organisational criteria — not as an indistinguishable part of the client's workforce. The contractor assumes economic risk and is remunerated based on results. A written mercantile contract is formalised and registered with the SEPE (Servicio Público de Empleo Estatal).
The TRADE status carries specific rights, including paid leave equivalent to 18 working days per year and protections against unjustified contract termination. However, registering a TRADE contract is not a compliance shield. Inspectors treat a SEPE-registered TRADE contract as a basis for closer scrutiny, not as a guarantee of legitimate autonomous status. If the worker is in practice operating like an employee — following orders, working on client tools, executing undifferentiated tasks alongside permanent staff — the TRADE label will not prevent reclassification.
| Indicio | Indicates employee (cuenta ajena) | Indicates legitimate contractor |
|---|---|---|
| Horario | Fixed hours set by principal | Contractor sets own schedule |
| Medios de producción | Client provides tools, equipment, workspace | Contractor owns and maintains own tools |
| Retribución | Fixed fee regardless of result | Fee tied to output or project delivery |
| Exclusividad | Works only for this client | Multiple clients or genuine market exposure |
| Integración en estructura | Integrated into company team, org chart, daily standups | Operates independently from client's internal structure |
| Riesgo empresarial | No business risk — company absorbs cost and result | Contractor bears commercial risk of the activity |
What Happens When the ITSS Comes Knocking
The Inspección de Trabajo y Seguridad Social (ITSS) has broad powers to investigate and reclassify contractor arrangements. Inspectors apply the ET Art. 1.1 criteria directly — they do not defer to the parties' contractual choice.
How ITSS detections work
The ITSS operates through two main channels: targeted sector campaigns and complaints filed via the anonymous fraud reporting portal (expinterweb.mites.gob.es/buzonfraude). Sector campaigns have historically focused on platforms and gig economy operators, logistics, and professional services, including technology and consulting.
In recent years, the ITSS has adopted the muestreo (sampling) technique, confirmed by the Tribunal Superior de Justicia de Valencia in Sentencia núm. 356/2025 (17 June 2025). Rather than assessing each worker individually, the inspector examines a representative sample of the contractor pool. If the sample demonstrates systematic misclassification, the findings are applied to the whole group. For companies with large contractor workforces, this dramatically accelerates the scale of potential exposure.
During an inspection, inspectors collect evidence including email communications, invoices, access logs, interview testimony from contractors and staff, onboarding documents, and any other operational data that reveals the true nature of the relationship.
Consequences for the company
If the ITSS determines that a contractor is a disguised employee, the consequences are stacked and cumulative.
First, an administrative fine under LISOS Art. 22.16 — the specific infraction for converting an employee to RETA status while maintaining the same activity. Under Art. 40.1.e (as updated by Ley 6/2017), the applicable sanction brackets are: grado mínimo €3,750 to €7,500; grado medio €7,501 to €9,600; grado máximo €9,601 to €12,000 — per worker affected. Each misclassified contractor is a separate infraction.
A finding on one worker can extend to your entire contractor pool via the muestreo technique (TSJ Valencia, Sentencia 356/2025). Ten misclassified contractors means up to €120,000 in LISOS fines alone — before retroactive Social Security contributions are added.
Source: LISOS Art. 22.16 + Art. 40.1.e (RDL 5/2000, as amended by Ley 6/2017)
Second, retroactive Social Security contributions. The TGSS can claim unpaid contributions going back four years from the date of the inspection, plus a recargo de mora (surcharge) of up to 20% in standard cases, plus interest.
Third, if the retroactive contributions accumulate to over €50,000 in unpaid cuotas across the four-year period — calculated exclusively on the cuotas themselves, not on recargos or interest (confirmed by the Tribunal Supremo, STS 723/2024) — the matter moves from administrative to criminal territory under Art. 307 of the Código Penal. This threshold is most relevant for companies with multiple misclassified contractors over extended periods.
Fourth, if the relationship is terminated after reclassification, it is treated as a dismissal. In the absence of a justified cause and proper procedure, the dismissal is classified as improcedente (unfair), triggering an obligation to pay the full statutory redundancy entitlement calculated from the original start date of the engagement, not the date of reclassification.
Position of the contractor
The contractor does not face sanctions. The infraction falls entirely on the company (empresa contratante). The worker may claim repayment of RETA contributions they paid during the period of misclassification, recover unpaid paid leave (30 calendar days per year under ET), and claim backdated extra payments (typically two per year). If the engagement has ended, the worker can seek compensation equivalent to unfair dismissal through the Juzgados de lo Social.
VAT and IRPF: The Contractor's Own Tax Obligations
Regardless of whether a contractor arrangement is compliant with employment law, Spanish contractors operating in RETA have their own fiscal obligations. The most complex scenarios arise when the client is outside Spain.
IVA when billing a foreign company (B2B)
Under Art. 69.Uno.1 of Ley 37/1992, when a Spanish contractor provides B2B services to a business client established in another country, the service is localised at the client's seat — meaning Spanish VAT does not apply and the client handles the tax in their own jurisdiction via the reverse charge mechanism. This rule applies to both EU and non-EU clients.
For EU clients specifically, the contractor must be registered in the Registro de Operadores Intracomunitarios (ROI), obtained by ticking the relevant box on the Modelo 036 at AEAT. Without a valid NIF-IVA intracomunitario, the contractor cannot legally issue VAT-exempt invoices to EU clients, and AEAT can challenge the transaction. The ROI registration process can take up to three months (silence equals rejection), so it should be initiated well before the first EU engagement.
Invoices to EU clients must carry the mention: "Operación no sujeta a IVA por inversión del sujeto pasivo — Art. 69.Uno.1 Ley 37/1992." The contractor should verify the client's NIF-IVA via the VIES system before issuing.
Register in the ROI before your first EU client invoice. Without a valid NIF-IVA intracomunitario you cannot issue VAT-exempt invoices to EU clients and will be forced to charge Spanish VAT at 21%. The Modelo 036 application takes up to three months — file early.
Source: Art. 69.Uno.1, Ley 37/1992 (AEAT)
Each quarter, EU service revenues must be declared in the Modelo 349 (declaración recapitulativa de operaciones intracomunitarias) using clave S (prestaciones de servicios intracomunitarias). The Modelo 349 is an informative declaration — it does not generate a payment or refund. Any discrepancy between the 349, the Modelo 303 (quarterly IVA), and the VIES data from the client's side generates an AEAT requerimiento.
For non-EU clients — US, UK, UAE, and others — Art. 69.Uno.1 applies in the same way. Spanish VAT does not apply to services rendered to non-EU business clients. These operations are not declared in the Modelo 349 (which covers EU operations only). They are reflected in the Modelo 303 as non-subject operations.
IRPF for the self-employed contractor
A contractor in RETA pays income tax on net professional income through the estimación directa system. For Spanish clients, the client withholds a retención of 15% on each invoice (or 7% during the first year of professional activity and the two following years, per Art. 101.5 LIRPF and RIRPF Art. 95). This withholding is remitted directly to AEAT by the client; the contractor does not need to make quarterly Modelo 130 payments for income subject to retención.
When the client is a foreign company with no permanent establishment in Spain, no Spanish retención is withheld. The contractor must calculate and self-pay quarterly income tax advances using Modelo 130 (pagos fraccionados, estimación directa), filed in the first 20 days of April, July, October, and January. The amount is calculated as 20% of the net income (after expenses) earned in the quarter, less any previous payments and withholdings.
Annual settlement is handled through the Declaración de la Renta (Modelo 100), where all income — whether subject to retención or self-paid via Modelo 130 — is consolidated.
Structuring the Arrangement Correctly
Identifying a compliance risk is only useful if you can resolve it. The structure of the engagement — not the contract's wording — determines the legal outcome.
Minimum safeguards for a defensible contractor arrangement
A contractor arrangement is most defensible when the following conditions are in place:
Confirm or build a genuine multi-client structure
The single most effective risk-reduction measure is a genuine multi-client portfolio. If the contractor invoices multiple clients, the TRADE threshold (75% to one client) is not triggered, and the dependencia risk is substantially reduced. If the economics make a single-client arrangement unavoidable, formalise it as a TRADE (see Step 3).
Draft a mercantile services contract that reflects the actual relationship
The contract should describe the output delivered, the contractor's freedom to set schedule and methodology, the contractor's use of their own tools and workspace, and the absence of integration into the client's reporting structure. A contract that contradicts the operational reality provides no protection — but a contract aligned with a genuinely autonomous structure reinforces the factual record.
Register as a TRADE with SEPE if the single-client threshold applies
If the contractor invoices 75% or more of income to one client and meets the remaining LETA Art. 11 conditions, the relationship should be formalised as TRADE. The written contract must be registered with the SEPE. TRADE status brings enforceable rights but also flags the relationship for ITSS scrutiny — genuine operational autonomy must be maintained in practice.
Register in the ROI before the first EU client invoice
File the Modelo 036 at AEAT marking the ROI registration option. The process can take up to three months. Without a valid NIF-IVA intracomunitario, the contractor cannot issue VAT-exempt invoices to EU clients.
Set up quarterly Modelo 130 payments for non-Spanish clients
If the client is based outside Spain with no local permanent establishment, no retención will be withheld. Configure quarterly Modelo 130 self-payment from the outset to avoid accumulating an unpaid IRPF liability.
Validate EU client NIF-IVA via VIES before each invoice
Visit the VIES portal (ec.europa.eu/taxation_customs/vies) to verify the client's NIF-IVA before issuing any VAT-exempt invoice. An invalid NIF-IVA can expose the contractor to a challenge from AEAT on the VAT treatment of the transaction.
When EOR is the right call instead
There are arrangements where a genuine contractor structure is simply not compatible with the operational requirements. If the client needs the person to work exclusively on client-defined schedules, using client tools, under day-to-day management, within the client's internal team — the relationship meets the ET Art. 1.1 criteria for employment regardless of how it is labelled.
In these cases, the appropriate structure is not a tighter contractor agreement — it is an Employer of Record (EOR). An EOR engages the worker through a licensed entity in Spain, registers them properly under the Régimen General of the Social Security, and manages payroll, withholding, and employment compliance. The company receives the services without the legal exposure of an undeclared employment relationship. For a detailed comparison of the contractor and EOR structures for international companies, see the guide to autónomo vs EOR in Spain and the complete employer of record Spain overview.
How ApexTax Helps
ApexTax operates as a Cross-Border Relocation Strategist and Single Point of Contact for internationally mobile professionals and the companies that engage them. For contractor compliance questions, ApexTax reviews the structure of the engagement — mapping the operational reality against the ET and RETA criteria — and assesses whether the arrangement is defensible, whether TRADE formalisation is appropriate, or whether an EOR route better serves the client's objectives.
ApexTax does not act as a gestoría, does not represent contractors or companies before the ITSS or AEAT, and does not file Modelo 130, Modelo 349, TRADE contracts with SEPE, or Social Security registrations. Those tasks are carried out by independent qualified labour lawyers and gestores selected and coordinated by ApexTax.
The typical engagement begins with a strategy session to map the current structure, identify exposure, and design a compliant path forward.