By Alma Delia Virto Aguilar, Postdoctoral researcher at the University of Valencia and Professor, International Taxation LLM, UNIR
Spain’s tax office has delayed its tax on digital services for the first and second quarters of 2021 until July 2021 to coincide with OECD deadlines to reach an international consensus on taxing the digital economy. The delay also anticipates the unveiling of a new European Union digital levy.
The digital tax, regulated by Law 4/2020, has been in force since January 16, 2021. As the self-assessment is quarterly, this means that prior to the government’s delay, the first income tax return should have been filled in April 2021.
On December 15, 2020, Spain’s Ministry of Finance published a draft order to approving the official form to present the self-assessment of the digital services tax. The proposal was subject to a public hearing on December 30, 2020. However, it has not been approved yet.
At the core of this deferment is the expectation of reaching an international consensus by the OECD´s Inclusive Framework (IF). The IF BEPS has agreed to work on a multilateral proposal to address the taxation of digital business. In line with this work, the OECD published in October 2020 a general plan base on two pillars. Pillar One focuses on establishing new nexus and allocation rules. The Pilar Two, for its part, aims to reach an agreement on a global minimum tax rate. Based on these proposals, the IF expects to reach an agreement in mid-2021.
The European Commission also is working on designing a digital levy that allows for a fairer contribution from companies that operate in the digital sector. In the first quarter of this year, the Commission implemented a feedback process with an impact assessment and public consultation to allow all stakeholders to provide their views on the new digital tax.
More details on the design and implementation of this new digital levy in the EU were unveiled on May 18, with the communication on “Business Taxation for the 21st Century”. It would coexist with the OECD global consensus on sharing a fraction of the taxable base of the largest multinational enterprises. It will be drawn to be independent of the future global agreement on international corporate tax reform and compatible with the WTO and other international obligations. The first proposal on the digital tax is expected in July 2021.
What will be the future of Spain’s digital services taxes? This tax regulation does not include a so-called sunset clause that provides for the expiration of the tax when an agreement was reached at either OECD or EU level. However, Spanish legislators have expressed their intention to implement this levy as a temporary measure until an international solution was implemented.
In any case, the tax levy implemented by international consensus and the EU will certainly be established through a directive and later transposed to the Spanish legal system. Therefore, Spain’s digital services tax will probably be reformed to adapt according to the approved directive or derogated.
Alma Virto
Alma Virto is a Ph.D. in International Tax Law at the University of Salamanca, Spain.
Alma has worked as a tax law clerk at the Supreme Court of Justice of Mexico; a tax advisor in Spain for companies with investments in Latin America; a director in the Attorney General's Office of Tax Matters in the Ministry of Finance; and a tax manager at Deloitte, Mexico.
She has also been a visiting researcher at the Institute for Fiscal Studies in Spain and at Queen Mary University in London.
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