The proposal for a Spanish digital tax created concerns from companies with customers in Spain as to if, how and when it will be applicable to their business.
The proposal of a digital tax has been discussed in a number of countries, including Italy, for a long time. But the Spanish Government launched on the 23rd of October 2018 a consultation on the topic which is based on a text that provides the following:
Which services fall under the Spanish digital tax?
The digital services falling within the scope of the Spanish digital tax are those in which the participation of an end user in a digital activity constitutes an essential input for the business and which enable that business to obtain revenue therefrom.
The tax rate for digital services tax under the current proposal is 3%, applicable to the gross income (excluding VAT) derived from the provision of the following digital services:
- the placing on a digital device of advertising;
- the services consisting in the making available of multi-sided digital interfaces to users (“intermediation services”), which allow users to find other users and to interact with them, and which may also facilitate the provision of underlying supplies of goods or services directly between users and
- the sale of data provided by the user and generated from accessing the digital device.
But the proposed Spanish digital tax applies only when the user’s digital devices are located in Spain. And the location of a user’s digital device is determined in accordance with its IP address.
To which entities does it apply?
Under the current proposal, the Spanish digital tax applies only to legal entities with an annual worldwide revenue of € 750 million or more during the previous calendar year and with revenue subject to the digital services tax of at least € 3 million.
But, for this purpose, the thresholds shall be determined at a group level.
What is excluded from the digital services tax?
The proposal of digital services tax excludes from its applicability:
- revenues derived from the online sale of goods or services made on a supplier´s website when the supplier does not act as an intermediary;
- the underlying sale of goods or services between users in the context of online intermediation services;
- online intermediation services aimed at providing users with communication or payment services and
- certain financial services.
Broadly speaking, the Spanish proposal is in line with the European Commission proposal presented on the 21st of March 2018. You can find the previous DLA Piper alert on the EU proposal here.
The Spanish digital tax distinguishes between the intermediation service itself which facilitate the provision of services or the supply of goods between end users (subject to tax) and the underlying supply of goods or services between the end users (not subject to tax). This aspect may require careful consideration from the compliance and planning perspectives.
It is expected that the Spanish digital tax will be applicable from 2019 as an indirect tax. This means that its application would not be restricted by Spanish tax treaties.