By Alma Delia Virto Aguilar, Ph.D., Visiting Researcher, University of Salamanca
Spain is on track to enact a digital services tax on the revenue of large multinationals despite threats from the US to introduce tariffs of up to 100% on Spanish goods.
On December 27, Spain´s Council of Ministers approved the extension of the current general State budget proposal to 2020, which did not include a proposal for a digital services tax. But this does not mean that Spain has left aside this important reform.
If, as expected, the political coalition between Socialist Party (PESOE) and left-wing Unidas Podemos succeed in forming a new government, a digital services tax proposal will likely again be sent to the Congress for approval.
It should be remembered that in 2018 PESOE and Unidas Podemos agreed to a budget which included a digital tax proposal. Although the fiscal estimate was rejected, the draft digital tax legislation was sent to parliament. But, as the government was later dissolved, the plan was abandoned.
The 2018 project received many criticisms. Nevertheless, it is expected to be presented to Congress on an identical basis as a consequence of the lack of another strong alternative to taxing digital business.
Spain’s digital services tax
Spain’s digital services tax would be a three percent tax on digital firm revenue. The tax would apply to revenues generated from activities where users play the main role in value creation. It would also only apply to companies with total annual worldwide revenues of €750 million and Spain revenues of €3 million or more.
The main objective of this tax is to require large tech companies to pay tax where they make their income. Therefore, the user must be located in Spain. Companies would be taxed only on online advertising services, online intermediation services, and for the sale of data generated from information provided by the user.
The proposal excludes tax on sales of goods or services between users, sales of goods or services made on the supplier´s website when the provider does not act as an intermediary, and certain financial services.
The current government has consistently expressed the intention to implement the so-called “Google tax.” The tax was included in the Stability Programme of Spain 2019-2022.
The OECD is leading a coalition of 130+ countries called the Inclusive Framework which is addressing the tax challenges on the digitalization of the economy. This project aims to create a unified alternative for taxing the digital economy by the end of 2020. In the meantime, Spain seeks to stabilize taxation with a unilateral approach based on a failed 2018 EU directive.
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.
Latest posts by Alma Virto (see all)
In light of DST developments my repeated question is whether there is still a way back to OECD Unified approach; I frankly doubt it.