Effective as of 16 January 2021, a new Digital Services Tax has come into force in Spain. The rate is 3% and it is levied on certain digital services provided by large multinational companies with the participation of users located in Spain. The Spanish Digital Services Tax applies regardless of the tax residence of the digital service provider, and involves several formal obligations which should be carefully analysed by taxpayers.
Law 4/2020, of October 15, on Certain Digital Services Tax (“DST Law”), has created a new indirect tax in Spain that applies on the provision of certain digital services in which there is a participation of users situated in Spain (place of supply is defined in the DST Law, with a presumption that the user’s device is located according to its IP address).
Taxpayers of DST can be entities resident in Spain or outside Spain that exceed the following two thresholds: (i) net turnover in the previous calendar year exceeds EUR 750 million, and (ii) income from rendering services subject to DST in Spain in the previous calendar year exceeds EUR 3 million. These thresholds are considered at a group level.
The tax is levied on the following digital services:
- Online advertising services, consisting in the inclusion of "targeted publicity" in a digital interface that appears on the device of a user in Spain;
- Online intermediation services facilitating deliveries of goods or provision of services between users, when at least one user is in Spain;
- Online intermediation services that facilitate locating and interacting with other users, when the user's account has been created in Spain; and
- Data transmission services, when the data has been generated in Spain.
DST is calculated as a 3% of the taxable base, which is the gross income obtained from the provision of these services (excluding VAT and other taxes). DST Law provides several rules to determine this taxable base.
Certain services are expressly excluded from the scope of DST, such as (i) e-commerce with no intermediaries, (ii) intermediation services consisting of exclusively digital content, communication services, or payment services, (iii) regulated financial services and data transmissions provided by regulated financial institutions and (iv) services carried out between group entities with a direct or indirect participation of 100%.
The DST assessment period is quarterly. The self-assessment of the DST corresponding to the first quarter of 2021 has been postponed until July 2021 (together with the DST of the second quarter of 2021) due to the delay in the approval of the DST Regulations.
Non-Spanish taxpayers will be required to obtain a tax identification number in Spain ("NIF") and to register in the business activities census. Non-EU resident entities will also need to appoint a tax representative for DST purposes.
The Draft DST Regulations establish several formal obligations for taxpayers such as (i) keeping records of information of the global total revenue derived from the services, the number of users in Spain involved, and the number of users involved globally, as well as the methods used to calculate the DST, (ii) preparing a descriptive report of the processes, methods, algorithms and technologies used to analyse the different aspects to be considered when calculating the DST taxable base, and (iii) identifying customers by name and, if available, VAT number.
In addition to penalties deriving from the lack of payment of the DST, the DST Law includes a specific penalty applicable in those cases where the relevant taxpayer fails to comply with the obligation to have systems, mechanisms or agreements which allow to determine the location of the user’s devices in Spain.
Multinational companies need to analyse their digital activity in Spain in order to determine if they would fall with the scope of DST in Spain, to be prepared to comply with the tax obligations in the first DST self-assessment.