After receiving a huge number of comments from public stake-holders during the public consultation period, the Spanish Government approved an additional stage of the digital-services tax regulatory process at a cabinet meeting last January 18th.

The Spanish DST draft law still require parliamentary approval before entering into effect.

The Spanish Government spokeswoman indicated at press-conference that Spain is in its route “to be the first EU country to adapt taxation to the new digital business models, to make companies pay taxes in the places where they generate profits…”.

The tax, she said, is referred to platforms that were working on a “privileged manner” and expressly said it was representing “unfair competition”.

She is not a technical person from the Minister of Economy nor Taxes, but in the explanations she provided she mentioned that the tax is aimed at “Platforms”, describing them as elements that put users in contact, precising also that the type of digital advertising to be taxed is “Targeted on-line advertising” that has “already  studied user preferences and behaviors….”.

As indicated in our previous DET3-post, the tax follows quite closely the EU Draft Directive text, and it will apply to companies with global revenue above EUR750 million, that generate at least EUR3 million of “in-scope” digital-services revenue in Spain.

Relevant changes and DET3 Comments

The key changes the text incorporates after the public hearing are the following:

• Confirmation that in the “in-scope” data transfers there is only place for those being supplied for consideration (being priced and charged).

The text precise that not only sales but also licenses of user generated digital data.  No precision about sales of data captured with sensors (IOT) or sale of data by a regulated financial entity as not subject to the tax like in the updated version of the EU DST Directive draft released during last December ECOFIN.

• A new definition of “Targeted Advertising” is inserted in the text, whereby “any form of digital commercial communication aiming to promote a product, service, or brand, targeted to the users of a digital interface through the data collected from them” would fall into it.

The most concerning inclusion here is a “Iuris Tantum presumption” that all advertising is “targeted”.

Charging the burden of proof to the tax payer in this complex determination is something that might generate important friction levels and cumbersome workload and analysis for companies above the 750EM threshold in any industry and not only digital players as more and more companies are moving to platform-based business models or have develop a deeper company website-based interaction as the first step of such transformation.

All these is connected to the inclusion of an additional formal obligation for companies to “establish the systems, mechanisms or agreements” enabling the user devices localization for the purposes of this tax application, and its connected new penalty regime around hiding IP addresses.

• A relevant difference with the EU draft was the fact that Inter-company transactions fall in scope of the Spanish DST.

Like in the targeted advertising case, we worked with the General Taxation Directorate during consultation to assist illustrating the practical cases where that measure could generate important inconsistencies across international value chains and multiple taxation situations difficult to correct.

The evolved text temper this inclusion down, by excluding transactions with related parties with 100% direct or indirect participation. It won’t resolve all cases but is a very welcome measure by the Multinationals community.

• Elimination of the difficult previous definitions about “systematic internalizers….” etc. in the financial services industry, being replaced by the introduction of a more understandable definition of “Regulated Financial Services” and “Financially Supervised (regulated) entity”.

This is in line with the last version of the EU Draft Directive released previous to last December ECOFIN.

Penalty CAP: Establishment of a range & CAP for the 0,5% penalty charged on last year Net Revenue in the case of being fined for not having appropriate control on the process of determining if user device was in Spanish taxable territory. Minimum penalty will be €15.000, and caped to €400.000.

If the Tax gets final approval in Parliament, smooth cooperation between the technological and technical arms of the Spanish Tax Administration in their analysis to ensure adherence to the “place of realization” declaration obligation should be required, but the new and additional formal obligation explained above moves a relevant part of that effort to the tax payer’s side.

The Italian and Spanish local DST versions are making progress towards approval with the draft Directive “full scope of services version”; That means the 3 initially targeted services in scope, not less, not more.

If the Franco-German approach generates a reduction in the scope in case of a potential unanimous agreement at EU level next March, both Governments will need to re-evaluate their internal timings or correct it the following years budget law (Spanish elected option). Likely the deficit levels pressure affecting both countries will impact their decisions.

On that, French Finance Minister Bruno Le Maire said yesterday that at EU level he is “convinced that a deal is within arm’s reach between now and the end of March” after the adjustment and alignment of the German-French positions.

In any case, he is firmly supporting EU Commission plan to eliminate the EU tax veto and has regrouped forces internally to have the French DST version ready in parallel.

A version that could tax Digital companies with WW gross sales higher than 750 million and 25 million euros of in-scope services in France, with a tax rate up to 5% and an a very expeditious regulatory approval process expected. 


Pendent to see what the results of the December critical debate at EU level on this topic under the current Presidency are, at this point, it seems that Spain is heading to be the potential first country implementing a unilateral digital service targeted tax with all its elements defined, with effect January 1st, 2019.
From DET3 we are actively participating in this debate with the local Directorate in charge and will continue to contribute within the spirit of our objectives.

That Spain gain taxing rights that “legitimately belong to its territory” in respect to specific digital services, in order to incorporate user’s contribution to the value creation process.

• The long period elapsed since the international debate started on this topic, and the absence of practical solutions.
• Reasons of social pressure, tax justice and tax systems sustainability.

Levied on gross B2B/B2C revenues from exploitation of specific types of digital services characterized by user value creation: “Where user participation is an essential contribution to the value creation process”.

• Digital advertising through an owned or third-party digital interface, addressed specifically to the users of such interface.

• Online intermediation services: Offering of a multisided digital platform that allow recurrent interaction between users with the purpose of:

o A direct delivery of underlying goods or services between those users (online intermediation).
o Just reaching other users.

• Sales of user data generated through their participation and activity in the digital interface.

Draft law intro sets also a clear co-relation between this essential contribution and the monetization.



• Where the entity placing the advertising does not own the digital interface, that entity, and not the owner of the interface, shall be the one providing a service falling in scope (same rule than EU Directive draft).


• On-line sales of goods & services made from vendor Website, when vendor sells in its own account and is not an intermediary.

• The underlying services or goods themselves.

• Where the sole or main purpose of making the interface available is supplying to users:

•            Digital content
•            Communication services
•            Payment services

• The supply by a trading venue or a systematic internaliser of any of the services referred to in Directive 2014/65/EU; Also, any data transmissions done by these regulated players.

• The supply of certain services by a regulated crowdfunding provider or a service consisting in the facilitation of the granting of loans.


Companies complying 2 cumulative conditions:

Carrying out in-scope digital services.

Being above both: WW revenue >750 M€
In scope digital services revenue > 3M€ in Spain.

Cross-border transactions & Domestic transactions are subject.

As a difference to the EU directive draft, inter-company transactions falling in scope are also taxed and they are required to be valued arm’s length.


The location of user value creation is considered to be in Spain when:

Digital advertising: When the user’s digital device is located in Spain in the moment that the advertising is displayed.
On-line intermediation with subjacent: when the user device in the transaction conclusion moment is located in Spain.
On-line intermediation without subjacent: when the user account in the platform was opened from Spain.
Data sale transactions: when the user of the interface was in Spain in the moment the data sold later was generated.

To this effect, a legal presumption is established about location of any digital device (“Spanish device”) to be determined based on the IP address of it throughout its use, unless something different can be concluded using geolocation or other current of future techniques.


Aligned to the EU directive allocation criteria.

Taxable base = Gross revenue (no deduction allowed)
Tax rate = 3%


  •  A declaration of activities initiation is required.
  •  A Tax ID number must be obtained.
  •  Request to be included in the Digital Services Tax Register to be created.
  •  Carry over any other formal obligation required by reglament.
  •  Appoint a Spanish representative if you are a non-EU tax payer.
  •  Maintain all relevant records & documents to support service transactions
    realized in Spanish territory.
  •      Translate them to Spanish when required only.
  •      Self-declaration, on a quarterly basis.
     If taxable base amount not known at declaration date, taxpayer to set it
    provisionally with a later regularization required.
  •      Deductible as a cost from Corp Tax


Hiding or faking the place of realization of the digital service or the IP Address it is to be considered a serious infringement of the tax code law with a penalty of €150 for each false digital access with a limit of 0,5% of the company previous year gross income.

Provisional tax that “should be removed as soon as a global agreement is reached, and a long-lasting solution implemented….”.


The text of the draft law is strongly based on the EU Directive draft, with some hues like the one on intercompany transactions and a more elaborated formal obligations part. The text clearly states that this is an “Indirect Tax” but sets some points of nuance differences with the VAT.

There is a sui generis sunset clause in the draft whose text is highly interesting; no mention to any tax treaty negotiation process.

The potential 0,5% limit on gross income for penalties would have to be calculated based on Group gross income.

The impact of the Internet Protocol addresses system in this potential new tax arena becomes an interesting new turn of the corner in the international debate around this topic. Discussion has a number of dimensions here.

Between October 23rd, and November 15th it is the time frame provided for stake-holders contribution to the public consultation comments.

It remains to be known the effect of the absence of majority of the current Government and the tough negotiation process for the public budget that will happen in the following weeks in Spain. This negotiation is intimately co-related with the new Digital Services Tax and the new Financial Transactions Tax proposed.

Australia drafts legislation to level playing field in online accommodation bookings

At the end of July 2018, the government released draft regulation and explanatory memorandum with the aim to extend the Goods and Services Tax (GST) to ensure that offshore sellers of hotel accommodation in Australia calculate their GST turnover in the same way as local sellers from 1 July 2019.
It amends the GST Act to require offshore suppliers of rights or options to use commercial accommodation in Australia to include these supplies in a GST return if such offshore suppliers equals or exceeds the $75.000 registration turnover threshold.
Applying the law if passed, would require analysis of the principal versus agent condition of the offshore supplier. The amendments of the law apply to Whole-sale level of the market where the wholesaler acquire title (right or option to use accommodation and on-sells those rights to a guest) so will seem to be affecting the big on-line bed-banks but would not apply to OTAs (online travel agencies) or agencies acting on behalf of the hotel. Expected coming into force would be July 1st, 2019.

DET3 comments
When talking about digital economy taxation, the Level the Playing Field discussion can have several dimensions. In this case is Foreign to local players dimension at indirect taxation level; this is draft proposal by now, but the amendments aim to ensure neutrality in the GST treatment of Australian hotel and similar accommodation regardless of whether the right to use the accommodation is purchased directly through an Australian supplier or from an offshore supplier.