Royal Decree 400/2021, which came into force on June 10, establishes the rules for locating users' devices and the formal obligations related to the Tax on Certain Digital Services. Companies that are required to pay this tax must locate users' devices within Spanish territory.

We inform you that in the BOE of June 9, 2021, Royal Decree 400/2021, of June 8, has been published, which develops the rules for the location of users' devices and the formal obligations of the Tax on Certain Digital Services (known as "Google Tax").

It should be remembered that Law 4/2020, of October 15, on the Tax on Certain Digital Services (LIDSD), which came into force on January 16, 2021, is an indirect tax, compatible with VAT, which is applied throughout the Spanish territory and taxes the provision of certain digital services.

Specifically, it only taxes the following: (i) inclusion, in a digital interface, of advertising directed to users of that interface (online advertising services); (ii) the provision of multifaceted digital interfaces that allow users to locate other users and interact with them, or even facilitate the delivery of goods or the provision of underlying services directly between those users (online intermediation services); and (iii) the transmission, including the sale or transfer, of data collected about users that has been generated by activities carried out by the latter on the digital interfaces (data transmission services).

The subjective scope of application of the tax is limited to legal persons and entities of article 35.4 of the General Tax Law (communities of property, dormant estates…), which exceed these two thresholds on the first day of the settlement period:

1. That in the previous calendar year the net amount of its turnover exceeds 750 million euros.
2. That the total amount of its income derived from the provision of digital services subject to tax, once the rules provided for the determination of the taxable base have been applied (in order to determine the part of said income that corresponds to users located in Spanish territory), corresponding to the previous calendar year, exceeds 3 million euros.

The application of this Law requires certain regulatory clarifications to develop some issues regulated in it, fundamentally, the formal obligations provided for in the LIDSD and the place of performance of the digital services provision.

1. Rules regarding the location of user devices

The device's location is determined by all the address details provided by the geolocation technology used, including, where applicable, latitude and longitude coordinates. This location is obtained through geolocation technologies that analyze information gathered from the device, the internet network to which the device is connected, or a combination of both.

The device will be presumed to be located in the place determined by geolocation based on the IP address of the device or the equipment through which the user's device accesses the service when it is on a certain network, unless it can be concluded that this place is different by using other means of proof.

For this purpose, geolocation based on network identification (WiFi, Ethernet or others), physical geolocation by satellite (with systems such as GPS-Global Positioning System, GLONASS, Galileo or Beidou) or by means of information provided by terrestrial wireless communication systems (such as GSM-Global System for Mobile Communications- or LPWAN), or by beacons (WiFi or Bluetooth), or any other combination of existing or future technologies may be used.

2. Formal obligations of taxpayers

These obligations include:

• is responsible for maintaining, preserving, and making available to the Tax Administration(when requested) separate records for each transaction, which must include the parameters necessary to calculate the tax: income and user location. These records are not subject to a specific format and must only be provided to the Tax Administration when requested by the taxpayer.
•  Preparation of a descriptive report.This report must describe the processes, methods, algorithms, and technologies used to analyze the taxability of the digital services provided, locate the provision of each service and its attribution to the territory where the tax applies, calculate the income corresponding to each service provided subject to the tax, and identify the files, programs, and applications used in the above processes.
• Establishment of systems, mechanisms or agreements for the location of usersin the territory of application of the tax: taxpayers are required to use one of these methods to capture the data necessary for location and the information obtained by the location systems and mechanisms must be kept for the limitation period of the tax.

You can contact this professional office for any questions or clarifications you may have.

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MGI Àmbit

A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.

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