EOR vs subsidiary vs contractor in Spain: Which structure should you use?

What do EOR, subsidiary and contractor arrangements give you?

A contractor sells services through their own business. An EOR provides a contractual employer and agreed employment administration. A subsidiary is a company that your group owns and operates. These options can all help get work done in Spain, but they allocate control and responsibility differently.

The comparison assumes an existing overseas business and a person who normally works in Spain with the right to work. It does not address immigration, temporary postings or regulated activities.

When can you use a contractor in Spain?

Contracting is worth considering when you can commission work that a professional organises independently. For example, an independent researcher might investigate demand and deliver a report using their own methods. You can agree the result and a deadline without turning the researcher into your employee.

Spain’s self-employment statute, Article 1, describes activity on one’s own account outside another person’s organisation and direction. Paid work within an employer’s organisation and direction falls within the Workers’ Statute, Article 1.

If the proposed person will fill a continuing role, take daily instructions from your manager and work as part of your team, assess employment. Asking them to register as self-employed or send an invoice does not establish independence.

Consider an illustrative change in the research project. Once the report is delivered, you ask the same person to run daily sales activity under your sales director. The work has changed. Reusing the original consultancy agreement is no answer to the new classification question.

The number of clients is also not a complete test. Spain has an economically dependent self-employed category, commonly called TRADE. At least 75% of qualifying income from one client is one condition; organisational independence and the other statutory requirements still matter. See Law 20/2007, Article 11. This is not a way to convert an employee into a contractor.

When is an EOR worth considering in Spain?

An EOR can be commercially useful when you want a provider to sign the employment contract and handle agreed administration while you assess the need for a company. The legal design needs to be reviewed before you rely on that convenience.

Article 43 of the Workers’ Statute restricts temporary worker supply to duly authorised agencies under the applicable conditions. It addresses mere labour supply and failure to exercise employer functions. If illegal assignment is established, the supplying and receiving employers are jointly liable for obligations to workers and Social Security.

The provider should explain the legal basis for your arrangement, who exercises employer functions and how the contracts match everyday management. A single hire or short market test does not create a statutory exemption. An authorised temporary work agency, or ETT, must also meet the conditions for its particular assignment under Law 14/1994, Article 6.

Keep the EOR on the shortlist if the arrangement is suitable and its administration is worth the fee. It does not create a company of your own to carry customer contracts, and it does not settle the parent’s tax exposure.

What would justify a Spanish subsidiary now?

A subsidiary becomes a stronger candidate when you want a separate Spanish business to employ the team and carry the contracts allocated to it. That may reflect your own group design or a specific customer requirement. Confirm what the customer actually requires before assuming incorporation is necessary.

The cost includes running the company after formation. The Companies Act requires preparation and deposit of annual accounts under Article 253 and Article 279. Budget for the accounting, tax, corporate and employment work applicable to the operation, including work retained by HQ.

An entity has a stronger business case when you can explain which responsibility it should hold. Headcount helps estimate the workload and costs; it cannot decide the structure alone. The wider subsidiary, branch and EOR comparison is useful if the parent might deliberately operate through a branch instead.

Can your overseas company employ directly?

Direct foreign-employer registration deserves consideration when employment is the main need. TGSS publishes registration requirements for foreign companies without a Spanish workplace, including company documentation and a representative resident in Spain.

Your overseas business remains the employer. Local payroll assistance can handle agreed work without creating a subsidiary or changing who employs the person. This requires the relevant registrations and employer arrangements, and a separate tax analysis.

The guide to hiring in Spain without a company explains that route in more detail. Evolutia’s payroll and employment support is relevant if your business will employ directly; broader tax work and bookkeeping need their own scope.

How does the structure affect permanent establishment?

An EOR or contractor arrangement does not automatically protect the parent from a Spanish permanent establishment. Permanent establishment concerns the overseas business’s activity in Spain. AEAT’s domestic definition covers continuing or habitual places of business and certain agents exercising contracting powers. The applicable treaty also matters under Article 4 of the Nonresident Income Tax Law.

A change from gathering market information to habitually exercising authority to contract for the parent can change the analysis. Assess what the person does, where they work and how the parent uses that location. Neither the label on an invoice nor the payroll provider supplies the tax conclusion. Creating a subsidiary also requires a clear allocation of activity between it and the parent.

How should you compare EOR, subsidiary and contractor costs?

Price only the routes that fit the intended work. A contractor quote for a defined result cannot be treated as a cheaper salary for the same managed role.

For employment routes, compare the same duties, remuneration and working pattern over the same period. The employment-cost calculator can provide an initial estimate; its simplified assumptions do not price a complete EOR contract or subsidiary. For the decision, use a role-specific employment calculation and actual proposals that separate employment costs from provider fees or direct-employer administration. For a subsidiary, add formation and the company work required by the intended activity.

Keep refundable deposits and capital funding separate from expense. They still affect cash needed. For an illustrative 12-month plan, total the costs in the table for the months when they arise. Run a second version in which you stop after month six, including commitments that remain payable afterwards. These are planning assumptions, not permitted contract durations.

An EOR followed by a subsidiary may serve a useful purpose, but both stages and the transition belong in the comparison. A lower monthly entity cost can still leave a higher first-year total after setup and transition. Equally, paying for a provider can be worthwhile when it supplies administration you would otherwise need to organise. Headcount alone does not identify the cheaper suitable route.

Can you stop when the market test ends?

A six-month commercial experiment does not itself justify a six-month employment contract. Article 15 of the Workers’ Statute presumes indefinite employment and limits ordinary fixed-term contracts to specified grounds. The end of the business experiment therefore needs its own employment analysis, including when a provider employs the person.

Before signing, establish what ends when the provider agreement ends, what costs remain payable and what process applies to the employee. For contracting, examine the agreed scope, notice and any applicable statutory protections. For a subsidiary, allow for ongoing company obligations and any closure work if Spain does not proceed.

Which route fits your first Spain project?

The following examples are illustrative. Each considers engaging one person in Spain, so proposed headcount cannot explain the different shortlists. They assume an existing overseas company, ordinary private-sector work and the necessary right to work.

The last outcome is useful for a seed-stage business. If you cannot yet say what someone will do, an entity quote and an EOR quote can create the appearance of a decision without resolving the work you need. Deferral is appropriate before commitments arise; it does not suspend obligations for activity already under way.

A later change of employer also needs its own plan. Forming a company does not itself move an employee onto its payroll. Whether the business-succession rules in Article 44 of the Workers’ Statute apply depends on what is transferred. Assess the legal mechanism, employee terms and provider obligations before treating migration as an easy exit from the original decision.

Decide what your Spain test needs

Discuss your Spain structure decision with Evolutia. Explain the work you need, who will manage it, any customer-contracting authority and the planned duration. Those facts help define whether you need a paid PE Assessment or another defined structure or employment project. Scope and price are agreed before chargeable work begins. A decision to defer incorporation can be the right outcome; an ongoing retainer is not a prerequisite for answering a defined question.