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Spain: Approval of the Preliminary Bill on the Tax on Certain Digital Services

Iván Escribano, senior associate at Tax department.

On October 19 the Council of Ministers approved the Preliminary Bill on the Tax on Certain Digital Services, which started the clock for the public consultation period until November 15. In principle, the preliminary bill is set to enter into force three months after its publication in the Official State Gazette, until the entry into force of a council directive on technology companies with a significant digital presence, which is not expected to be approved before 2021.

The tax will be charged on the supply of certain digital services provided by companies recording net revenues above €750 million and obtaining total revenues above €3 million from taxable supplies of digital services.

It is the following digital services that will be taxable:

  • Online advertising: placement on a digital interface of advertising targeted at users of that interface (banners and various types of advertisements).
  • Online intermediation: making available of digital interfaces allowing users to find, or interact with, other users, or facilitating supplies of goods or services between those users, and.
  • Data transmission: transmission of data collected about users and generated from their activities on digital interfaces (sale of metadata).

By contrast, sales of goods or services contracted online via the website of the supplier of those goods or services and where the supplier does not act as intermediary are not taxable.

The supply of taxable digital services will be considered to be made in Spain, if a user is in Spain, regardless of whether the user has paid any consideration contributing to generation of the revenue obtained from the service. So the user will be considered to be in Spain:

  • Online advertising: if the advertising appears on the user’s device and the device is in Spain.
  • Online intermediation: if supplies of goods or services between users are facilitated, where the transactions between them are carried out through the interface of a device that is in Spain when the transactions are concluded. If supplies of goods or services between users are not facilitated (on social media, for example): where the account allowing the user to access the interface was opened on a device that is in Spain when it was opened.
  • Data transmission: where the data is generated by a user on a digital interface that the user accessed using a device that is in Spain when the data is generated.

The device’s location is determined from its IP address, and falsifying or concealing that IP address has been made an infringement.

The tax liability is calculated by multiplying the revenues obtained from supplying those digital services, exclusive of VAT and equivalent taxes, by a 3% tax rate. So the revenues will be calculated as follows:

  • Online advertising: total revenues x (number of times the advertising appears on devices in Spain / number of times on any device).
  • Online intermediation services facilitating supplies of goods or services between users: total revenues x (users in Spain / total number of users involved in the service).
  • Other online intermediation services: revenues obtained from users where the accounts allowing access to the interface are opened on a device in Spain.
  • Data transmission: revenues x (users generating the data in Spain / users generating all the data) regardless of when the transferred data were collected.

The taxpayer's obligations include self-assessing the tax quarterly, filing specific notifications for registration purposes, obtaining a taxpayer identification number in Spain, being entered on a specially created register of entities, keeping certain records that will be determined by regulations, reporting to the tax authorities automatically and regularly or whenever requested to do so, appointing a representative for non EU residents unless they have an establishment in a state with mutual assistance instruments similar to those in the EU; keeping proofs of payment and documents substantiating transactions for the statute of limitations period, and translating into Spanish or another official language at the request of the finance authority any invoices, contracts or other documents supporting the supplied services.