Spanish government to introduce new digital services tax

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Global Tax Alert


The Spanish government has announced a proposed Digital Services Tax (DST). The proposal for the DST was presented for public consultation on October 23, 2018.

The digital services falling within the scope of the DST 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 DST under the proposed law in Spain is 3 percent, applicable to the gross income (excluding VAT) derived from the provision of the following digital services:

  • The placing on a digital device of advertising
  • 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.

The proposed DST applies only when the user's digital devices are located in Spain. In this regard, the location of a user's digital device is determined in accordance with its IP addresses.

Under the current proposal, DST 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 DST of at least €3 million. For this purpose, the thresholds shall be determined at a group level.

In general terms, the DST proposal excludes from taxation:

  • revenue 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.

Key takeaways

Broadly speaking, the Spanish proposal is in line with the European Commission proposal presented on March 21, 2018. You can find the previous DLA Piper alert on the EU proposal here.

In line with the European Commission proposal, Spanish DST distinguishes between the intermediation service itself which facilitate the provision of services or supply of goods between en -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 DST will be applicable as of 2019 as an indirect tax. This means that its application would not be restricted by Spanish tax treaties.

Businesses with an annual worldwide revenue exceeding €750 million during the previous calendar year and with revenue subject to the DST exceeding €3 million are advised to investigate the impact of the proposed DST on their digital business operations in Spain, especially those with significant online advertising, transmitting data collected about users or providing intermediation services.

Learn more about Spain's DST tax by contacting either of the authors.