Tax on Certain Digital Services: the Directorate-General of Taxes clarifies some key aspects of the tax
Spain Tax Alert
Among others, it clarifies that when the tax base must be determined provisionally because the taxpayer does not have all the elements necessary for calculating it definitively, the subsequent regularization will not give rise to surcharges but it will give rise to interest
The clarifications given by the DGT include, most notably:
a. Targeted advertising:
According to the Law, advertising is presumed to be targeted unless proven otherwise. For these purposes, the DGT clarifies that in order for advertising to be considered targeted, it is essential that, when determining the announcement to be shown on the interface, user data (one or more items of data) are used which may have been compiled before or during browsing by the user him/herself or by third parties, and they do not necessarily have to come from the use of digital interfaces They may be geographic or socio-demographic data, or data on individual preferences or interests, search words or user profiles.
The Law also establishes that the taxpayer is the party who places the advertising on the interface, when it is not the owner of the interface According to the DGT, the taxpayer is either be the owner of the interface (if it is the one that places the advertising content) or a third party who, pursuant to an agreement with the owner, sells its advertising space, acquiring the right or the obligation to include advertising in them (an “affiliate network”). To prevent cases of “cascading” taxation, the DGT clarifies that the function of placing advertising is only performed by one of the entities involved.
b. Online intermediation:
According to the Law, online intermediation services are those involving the making available of a multi-sided digital interface to users which permits interacting with users, (i) to facilitate the performance of underlying supplies of goods or services between users or (ii) to allow users to find other users and interact with them. In this regard:
It is necessary for there to be at least two users and for them to be brought together through an interface that allows them to interact concurrently, but it is not necessary for them to use the device at the same time when the transaction is concluded.
“Online intermediation with an underlying transaction” is a service in which a digital interface is used to facilitate the supply of goods or services. In contrast, an “interaction service” is one in which there is no underlying transaction, and it consists of intermediation in the making available of an interface for users to interact with each other (sharing contents, opinions, etc.).
The cases which are not subject to the tax, specified in paragraphs a, b, c and d of article 6 of the Law, must be deemed to refer only to online intermediation services, not to online advertising services. Those cases relate to (i) online sales of goods or services on the supplier’s website (in which the supplier does not act as intermediary), (ii) supplies of goods or services between users, (iii) supplies of online intermediation services where their aim is to supply contents or provide communication or payment services, and (iv) financial services by regulated financial institutions.
With respect to the case (i) of sales of goods or services online, it is necessary to determine whether the supplier only sells goods or services for its own account or also provides intermediation services. To this end, it will be necessary to consider the agreements between the parties, but in general the intermediary will be the one who, through the interface, puts the users who participate in the underlying transaction in touch, regardless of whether or not the intermediary imposes conditions on that transaction.
c. Intra-group transactions:
The law establishes that services will not be subject to the tax where they are provided between wholly owned (direct or indirect) group entities. The DGT has clarified that this case will also extend to transactions performed between entities that have a common direct or indirect (100%) parent company.
d. Taxable amount and chargeable event:
The tax will be calculated transaction by transaction and not on an aggregate basis for all the transactions in an assessment period. “Transaction” is deemed to mean:
In online advertising:
If the advertising is the result of agreements between the taxpayer and the advertiser, each agreement between them for the purpose of providing the service.
In the case of programmatic advertising, in which the advertisements are included on advertising spaces of the owner of the interface through platforms that serve to optimize and automate the sale of advertising spaces, the set of services supplied by each platform to the taxpayer in an assessment period.
In online intermediation with an underlying transaction, each intermediation service with respect to each underlying transaction; and in all other intermediation services, each agreement between the taxpayer and the users that is for the purpose of opening or renewing the account.
In data transmission, each agreement between the taxpayer and the acquiror.
The chargeable event, according to the law, occurs when the transaction is provided, executed or carried out. The taxpayer may evidence when this moment occurs, but the transaction can be deemed to have been performed when the invoice is issued (the chargeable event being brought forward when advanced collections take place, in proportion to such collections).
In relation to the taxable amount:
If the transactions are confined to the territory of application of the tax, the taxable amount will be all the revenues obtained in Spain.
If they go beyond that territory, the calculations set out in article 10.2 of the law will apply.
If the transactions do not refer to a geographical area, worldwide revenues will be taken into account and the rules set out in article 10.2 will apply to them.
Lastly, with regard to correcting the taxable amount, the following is clarified:
If the taxable amount was known at the time of the chargeable event but was determined incorrectly, the taxpayer must follow the general procedure provided for in the General Taxation Law by filing supplementary returns or requesting the correction of self-assessments.
If the taxable amount was not known and an estimate should have been made, when the definitive amount is determined, the taxpayer must apply the special adjustment mechanism provided for in the Digital Services Tax Law. In other words, the adjustment will be made when the definitive amount is determined within 4 years after the chargeable event, without surcharges but with interest.