US citizen working for US company as a telecommuter in Spain
My company has told me that I cannot telecommute from Spain is because if I am working from a foreign country for more than 8 weeks, there are tax and worker compensation laws that require my company (a corporation) to be registrerd in Spain.
In my case, I would still be an employee of the Denver office, my paychecks would still be direct deposited into my bank account in Colorado, and therefore I understand that the applicable taxes would still be Federal and State of Colorado taxes. I will not be performing any work for a Spanish client, and all of my work will be still be US-based work.
Does my employeer need to pay any taxes in Spain in this scenario?
Not being a CPA, and especially one that specializes in international taxation, I would not be able to answer your question as it is asked. In fact this question might better be addressed to an attorney who specializes in international labor laws.
With that being said, you might want to consider a different approach: if you form a company (such as an LLC), through which you would provide a service to your US employer, your physical presence in Spain might not be relevant anymore since you are not an employee, but a subcontractor working though a separate legal entity (an LLC).
If you like run it with your employers to see what they think about this idea.