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Spain: Digital services tax legislation, update

Spain: Digital services tax legislation, update

A panel of the lower house of the Spanish parliament on 28 February 2020 published draft legislation to impose a tax on certain digital services. The bill is now being considered by parliament, and amendments may be made during the parliamentary process.


Related content

The legislation is similar to a draft version of legislation approved by the Spanish government on 18 February 2020. Read TaxNewsFlash


The draft digital services tax legislation generally resembles a proposed EU directive as well as the digital services tax measures in France and Italy. This version of the legislation is the second attempt by Spain for a new tax that would apply to certain digital services; an earlier draft was considered in January 2019.

The digital services tax as proposed is viewed as a transitional (and unilateral) measure until there is an EU directive for the taxation of digital services or until a consensus for the taxation of digital services is reached by the Organisation for Economic Cooperation and Development (OECD) and the G20 countries.

The Spanish government expects that the proposed digital services tax would raise approximately €968 million a year.  

Digital services tax, details

In general terms, the proposed digital services tax would be levied on provisions of certain digital services—all of which have in common that value is created by online user interactions in Spain, by which user data is exploited, and ultimately revenue is generated. This is referred to as “user value creation.” 

Accordingly, Spain’s proposed digital services tax would not only affect “digital companies” but also would affect digital business models. The fact that the tax would focus on services rendered, without regard to resulting profits, may explain why the tax has been designed as an indirect tax (like a value added tax (VAT)), and thus would fall outside the scope of income tax treaty relief measures.

Taxpayers subject to the tax

Companies that operate globally and have a “significant digital footprint” in Spain would be subject to the proposed digital services tax if the following two thresholds are satisfied (at the consolidated group level):

  • Net turnover of more than €750 million (globally)
  • Total revenues from taxable provisions of digital services in Spain of more than €3 million 

In 2020, the total income from taxable digital services would be calculated based on the effective date of the legislation and measured until the end of the assessment period, then afterwards annualized.

Taxable services

The digital services tax would be levied solely on provisions of certain digital services rendered in Spain (i.e., the services somehow involve users located in Spain). The definition of “digital services” therefore would be critical because it would define the type of services that would be subject to the proposed tax. These would include:

  • Online advertising services targeted at users—that is, services consisting of the placement by an entity on its own or on a third-party digital interface, of advertising targeted at the users of that interface (in other words, any form of commercial digital communication aimed at promoting a product, service or brand, and targeted at the users of a digital interface based on the data gathered by them)
  • Online intermediary services—that is, those made available to users of a multi-sided digital interface that facilitates either the underlying supply of goods or services directly between users, or the locating of and interaction with other users (digital platforms)
  • Data transmission services—that is, the transmission of data collected about users generated by the activities of users on digital interfaces

The draft digital services tax legislation in Spain also would address various situations that would not be taxable, and many of these would coincide with those situations noted in the EU’s proposed directive. 

Place of supply of digital services

The provision of digital services would be deemed to take place in the tax territory where any of its users are located. The term “user” would be broadly defined to apply to any person or entity using a digital interface. A user would be deemed to be located in Spain under various rules, all of which have in common the fact that the critical factor would be where the device enabling the services (e.g., a mobile phone) is located at each moment.

There would be a general assumption whereby a particular device of a user would, in principle, be deemed to be located based on its internet protocol (IP) address. Nonetheless, evidence to the contrary could be allowed to disprove this assumption.  

Tax base

The tax base would be the amount of revenues earned by the taxpayer for each provision of taxable digital services in the tax territory.

Tax rate

The tax would be imposed at a rate of 3%.  

Compliance aspects

The new digital services tax would be self-assessed by taxpayers on a quarterly basis. For 2020, the the self-assessments must be filed and settled by no later than 20 December this year for quarters once the law is effective (expected to be three months after publication in the official state gazette).

Taxpayers would be subject to certain formal obligations, such as:

  • A reporting obligation (either periodically or at the request of the authorities) of information concerning the subject digital services
  • Appointment of a representative in order to meet relevant obligations of taxpayers from a non-EU third party
  • Recordkeeping obligation to establish proof of where the taxed digital service was supplied
  • Language translation requirement, to translate into Spanish (or any other official language) of supporting documentation with respect to digital services deemed to have been supplied in the tax territory
  • Requirement to have systems, mechanisms or arrangements enabling users’ devices located in the tax territory of Spain

Read a March 2020 report [PDF 220 KB] prepared by the KPMG member firm in Spain

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