Digital Nomad Visas: Employer Risks Behind Employee Requests

Requests from employees to work abroad under digital nomad visa arrangements are becoming increasingly common. Often framed as a personal lifestyle choice — with employees offering to “take care of everything themselves” — these requests are frequently underestimated by employers.

In reality, agreeing to digital nomad visa arrangements can create significant tax, payroll, social security, and compliance obligations for the employer, even where no local entity exists and the employee bears the visa costs personally.

Without proper assessment and central oversight, what appears to be a low-risk accommodation can quickly escalate into a costly compliance issue.

Why Digital Nomad Visas Are Often Misunderstood

Digital nomad visas are typically marketed as individual immigration solutions, giving employees the impression that employer involvement is minimal or optional.

However, immigration approval alone does not remove employer obligations.

While immigration is often the first concern raised, remote working abroad can also expose employers to permanent establishment and corporate tax risks, as explored in more detail in our article on remote working and permanent establishment risks for employers.

In practice, tax authorities and social security institutions assess the economic reality of the arrangement — not how it was described internally.

Spain as a Case Study: Where Complexity Quickly Emerges

Spain provides a useful illustration of how digital nomad arrangements can become employer-led compliance projects.

Spain’s Digital Nomad Visa, introduced under the Startup Act, allows qualifying individuals to live and work remotely from Spain, as outlined by the Spanish Ministry of Foreign Affairs in its official guidance on Digital Nomad Visas for Spain.

What is often overlooked is that employer involvement does not end with immigration approval.

The Unforeseen Employer Obligations Behind a Digital Nomad Visa

The following case study highlights the often-unforeseen challenges employers face when attempting to accommodate an employee’s request to work remotely abroad using Spain’s Digital Nomad Visa.

Background

• An employee requests to relocate to Spain for personal reasons.
• The employee confirms they will personally cover the costs of the digital nomad visa.
• The employee independently engages a Spanish immigration specialist to begin the visa application process.

At first glance, the request appears straightforward and low-risk for the employer.

Issue 1: The A1 Certificate Requirement

Early in the process, it becomes clear that obtaining the Digital Nomad Visa requires an A1 Certificate from the employee’s home country.

This immediately triggers employer involvement:

• The employer must formally participate in the A1 application.
• Unexpected professional fees arise for the employer to assess and submit the application.
• The assumption that the process is “employee-led” proves incorrect.

What was presented as an individual immigration matter becomes a cross-border social security compliance issue.

Issue 2: Shadow / Non-Resident Payroll Obligations

During discussions with the international tax adviser assisting with the A1 application, a further issue emerges:

• Spain requires the employer to operate a non-resident (shadow) payroll.
• This applies even though the employer has no legal entity or business presence in Spain.

To comply, the employer must:

• Understand Spanish payroll and withholding requirements
• Register appropriately with the Spanish tax authorities
• Incur additional professional advisory and compliance fees

At this stage, the arrangement is no longer administrative — it has become a formal cross-border employment structure.

Issue 3: Power of Attorney and Governance Risks

Seeking to minimise further costs, the employee offers to assist with the local administrative burden.

This leads to:

• The employee being appointed as a legal representative of the foreign employer in Spain
• The non-resident payroll being registered at the employee’s personal Spanish address
• Payroll being operated using the employee’s Digital Certificate and personal Spanish bank account

To facilitate this, the employer grants the employee Power of Attorney (PoA).

While this approach reduces short-term professional fees, it introduces significant governance and operational risks:

• The employee now has legal authority to act on behalf of the foreign entity
• The employer becomes reliant on the employee’s ongoing cooperation
• Any failure to fund tax payments or meet deadlines exposes the employer to penalties and interest

Outcome

What began as a simple request to work remotely from Spain — with the employee promising to handle all visa-related costs — evolved into a time-consuming, costly, and risk-heavy arrangement.

The employer incurred:

• Unexpected professional fees
• Ongoing compliance obligations
• Operational dependence on a single employee
• Exposure should the employment relationship deteriorate

All of this arose despite the absence of a Spanish entity and despite the employee’s best intentions.

Key Lesson on Digital Nomad Visas

Digital nomad visa arrangements are rarely “employee-only” solutions.

Without upfront assessment and structured governance, employers may find themselves carrying far more responsibility and risk than anticipated.

Social Security – The A1 Certificate Is Not Optional

Where an employee remains employed by a foreign company while working from Spain, EU social security coordination rules typically apply.

Even where the employee is willing to bear visa costs personally, employers remain responsible for social security coordination, including obtaining an A1 certificate under EU rules, as explained by the European Commission in its guidance on
social security coordination and A1 certificates.

Without a valid A1 certificate:

• Spanish social security contributions may become due
• Retroactive liabilities can arise
• Penalties and interest may be imposed

This obligation cannot be delegated to the employee.

Non-Resident Payroll and Tax Registration Requirements

In many cases, Spain will require the employer to operate a non-resident payroll (NRP), even where no Spanish entity exists.

This can involve:

• Obtaining a Spanish tax identification number (NIF/TIF) for the foreign entity
• Registering for payroll and withholding tax purposes
• Securing a digital certificate in the name of the foreign company
• Establishing a compliant payment method capable of settling Spanish payroll taxes via NRC
• Appointing a Spanish legal representative

These are corporate obligations, not individual ones — regardless of how the arrangement is positioned internally.

The Hidden Risks of Employee-Led Compliance

Some employers attempt to simplify matters by allowing the remote-working employee to “handle” compliance locally, often via a power of attorney.

This approach introduces additional risks:

• Granting legal authority to an employee to act on behalf of a foreign entity
• Exposure if the employee fails to make timely tax payments
• Disputes if the employment relationship deteriorates
• Ongoing dependency on an individual over whom the company has limited control

In practice, allowing employees or local teams to manage these arrangements independently mirrors the broader risks of decentralised mobility management, which we discuss in why decentralised management of international assignments creates hidden risks.

Why “Employee-Paid” Does Not Mean “Employer-Free”

A recurring misconception is that employer risk is mitigated where the employee agrees to cover:

• Visa application costs
• Professional fees
• Local compliance expenses

From a regulatory perspective, this distinction is largely irrelevant. Authorities focus on:

• Who employs the individual
• Where work is physically performed
• Who benefits economically from that work

Governance failures often manifest in situations like this. These challenges are often compounded where companies lack a clear global mobility governance framework or rely on ad-hoc decision-making, an issue we examine further in why tax equalisation policies and mobility systems frequently fail.

What Employers Should Do Before Approving Digital Nomad Visa Arrangements

Before approving any digital nomad visa arrangement, employers should implement a structured review process that includes:

• Immigration eligibility assessment
• Social security position analysis (including A1 feasibility)
• Payroll and withholding obligations
• Corporate tax and PE risk review
• Governance safeguards and approval protocols
• Clear documentation of responsibilities and risk ownership

What may appear to be a flexible employee benefit is, in reality, a cross-border employment arrangement that requires the same level of diligence as a formal international assignment.

Final Thoughts on Digital Nomad Visas

Digital nomad visas are not merely an immigration solution — they are a global mobility issue with legal, tax, payroll, and governance consequences.

Workers who dream of the digital nomad lifestyle, often want to move to places like Dubai, on a Golden Visa, (mistakenly) expecting no tax for expats or their employers or to Norway, which currently has no digital nomad visa route at all — see our Norway work permit and work visa article for what applies instead.

Employers who recognise this early can support flexible working arrangements without exposing themselves to unnecessary risk. Those who do not often discover the true cost only when authorities begin asking questions

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