Spain proposes 3% digital services tax

The government has also approved draft legislation to introduce a 0.2% financial transaction tax on the acquisition of shares in large Spanish listed companies. Both draft laws will now be presented to the Spanish parliament for debate and approval.

Treasury minister María Jesús Montero stressed that the government was committed to achieving international consensus on taxation of the digital economy through efforts led by the Organisation for Economic Cooperation and Development (OECD). Spain will adopt any internationally agreed legislation; while affected companies will not be required to declare their income taxable under the Spanish rules until at least 20 December 2020, to "give greater leeway to reach an international agreement on the tax", according to the announcement.

The Spanish government is following the governments of France, Italy and the UK in bringing forward proposals for a unilateral digital services tax.

Spain has proposed to tax "services in which an essential contribution from users exists in the process of creating value for the company"; namely the sale of online advertising, online intermediation services and the sale of data generated from user-provided information. The government expects to raise €968 million from the tax.

The tax would be applied at a rate of 3% on revenue generated from the activities of users based in Spain. Only companies whose worldwide turnover exceeds €750m and whose Spanish revenue exceeds €3m will be liable for the tax.

Montero said that Spain needed to adopt a "fairer and better distributed" fiscal system in line with other European countries. Changes were also required to address digital businesses' unfair advantage over 'traditional' businesses, she said.

"Spain, as a modern and advanced nation, cannot allow its tax system to be anchored in the previous century," she said.

Tax expert Eloise Walker of Pinsent Masons, the law firm behind Out-Law, said: "The introduction of a Spanish digital services tax will surprise no-one, as they are merely following the trend already set by France and the UK".

"This will put further pressure on the OECD to find an internationally acceptable proposal in the face of yet another unilateral measure," she said.

The OECD announced at the end of January that 137 participating countries had agreed to an outline proposal to address the tax challenges of digitalisation, with the aim of reaching a final agreement by the end of this year. However, Pascal Saint Amans, director of the OECD's Centre of Tax Policy and Administration, has acknowledged that this timeline will be "extremely challenging", particularly as the US is pressing for 'safe harbour' alternative regime applicable where individual companies meet particular conditions.

The OECD's proposal would apply to revenue generated from 'automated digital services', regardless of whether that revenue is generated on behalf of a digital business or a traditional business that engages heavily with its customers through digital technologies. Services captured may include online search engines, social media platforms, digital content streaming, online gaming, cloud computing services, online advertising services and potentially online marketplaces and other intermediaries.

The UK has finalised plans for a 2% digital services tax, which it plans to introduce in April on an interim basis. France has already introduced a 3% digital services tax, but announced last month that it would postpone collection in support of the OECD's efforts.