The new Spanish Tax on Digital Services aims at taxing companies in the countries where they generate profits. However, it is not covered by Double taxation treaties, as it is not based on obtaining income or the possession of wealth but on the value incorporated to the services supplied in a concrete territory.
The Spanish government has started to work on new regulations implying significant changes in the Spanish tax system:
A. The creation of new tax figures: the Tax on Financial Transactions and the Tax on Certain Digital Services, in accordance with the recommendations of the main international organizations.
B. Measures to fight against tax fraud, as a basis of the Spanish Government’s tax policy.
Focusing on the Tax on Digital Services, it will be created in order to tax the operations of the Digital Economy that are currently untaxed. It is based on the Directive proposal presented by the European Commission on the 21st of March 2018, to adequate taxation to the new business models.
It aims at taxing companies in the countries where they generate profits. However, it is not covered by Double taxation treaties, as it is not based on obtaining income or the possession of wealth but on the value incorporated to the services supplied in a concrete territory.
- This tax shall levy digital services in which there is a participation of the users: (i) online publicity; (ii) online brokerage services; and, (iii) transfer of data which have been generated from the information provided by users. There are, however, certain transactions that are specifically excluded such as the sales contracted online through the web page of the supplier, without any intermediary.
It will affect companies with total annual global revenues exceeding € 750 million and with income obtained in Spain for online services of over 3 million €. Hence, it will exclude small-sized entities and will focus on companies with a significant amount of transactions in the Spanish territory.
- It applies irrespective of the country where the service provider company is established (Spain, the EU or any other third country).
In order to determine when a transaction shall be considered to take place in Spanish territory, the regulations take into account when the user is located in Spain, that is to say when the user’s device is located in Spain (IP internet protocol address).
- The rate of taxation will be 3% of the revenue received by the companies providing these services, excluding the VAT or any other indirect tax similar to it.
- This new tax will entail new formalities that will need to be accomplished by the taxpayers in Spain such as census registration, the appointment of a Spanish fiscal representative when the company is resident in a non – EU country or the filing of quarterly tax returns.