Global Tax Alert

Following the entry into force of Law 4/2020 on Digital Services Tax (DST) (see our Tax Alert of 9 February 2021) further regulations have been recently adopted:

1. On 9 June 2021, Royal Decree 400/2021 dated 8 June 2021, clarifying the location rules of users' devices and the formal obligations of the DST was published to:

• specify the alternative geolocation mechanisms to the Internet Protocol (IP) address that may be used to determine the location of users' devices;

• develop the formal obligations to be fulfilled by the Digital Service Tax taxpayers, which include the following:

a. keeping and making available to the Spanish Tax Authorities a record of the transactions subject to DST;

b. preparing a detailed report of the processes, methods, algorithms, and technologies used to (i) analyze whether the services rendered are subject to DST, (ii) determine the location of each of the services rendered and and their allocation to Spanish territory, (iii) calculate income arising from the relevant transactions, and (iv) identify the files, applications, and programs used in such processes; and

• adapt the Royal Decree 1065/2007 approving General Regulations on Tax Proceedings to cover DST-related registration proceeding for taxpayers being subject to DST.

2. On 11 June 2021, Order HAC/590/2021 dated 9 June 2021, approving tax form 490 of “Self-assessment of the Digital Services Tax” and determining the procedure for its filing was published:

• the self-assessment shall be filed quarterly. The term for its filing is the month following the end of the corresponding quarter. However, the tax return of the first quarter of 2021 will be filed within the second quarter term (i.e. from 1 July to 2 August 2021);

• form 490 may only be filed by electronic means.

3. On 29 June 2021, the Spanish General Directorate of Taxes issued a resolution which interprets and clarifies some aspects of the DST:

• the resolution clarifies that the exemption applicable to certain online services foreseen in the Law (i.e when services are provided for the purpose of supplying digital content, communication services or payment services to users) only covers intermediation services while other services subject to tax i.e targeted advertising, provided through these intermediation platforms are subject to tax;

• the resolution defines the concept of intermediary, stating that in some cases, even if the intermediary imposes conditions on the underlying transaction such as price or other contractual conditions to customers they may still be regarded as intermediaries for the purposes of DST;

• with respect to the exemption related to the provision of digital services between companies forming part of the same group with a 100% direct or indirect participation, the resolution further clarifies that this exemption applies to intra-group transactions between affiliates participated at 100% directly or indirectly by that same parent company;

• with regard to the calculation of the taxable base, the resolution explains that it takes place on each transaction, individually considered, and not for the total amount of the assessment period. In this regard:
  • if the transactions are directed only to Spanish territory, the taxable base will be constituted by the total income obtained in Spain;
  • if the transactions are not directed to a specific geographical area, the rules of section 10.2 of DST Law will be applied to the worldwide income of the entity to determine the part corresponding to the Spanish territory.

• in cases where the taxable base is not known at the time of filing the tax return the taxpayer should make use of the special adjustment mechanism of the DST law where the surcharge for late filing is not applicable (but it will not exclude delay interest).

Affected companies are advised to closely examine these clarifications to assess what changes to their processes and technology may be required to enable reporting under the Spanish DST regulations.