We'll tell you how the Google tax will affect large technology companies.
On February 18, the Council of Ministers approved the Draft Law on the Tax on Certain Digital Services (IDSD), popularly known as the Google Tax, a tax that aims to tax those large technology companies that provide digital services in Spain without being physically present there, and which, under current tax regulations, did not pay tax in Spain.
The Tax on Certain Digital Services is an indirect tax that aims to tax the provision of certain digital services in which there is intervention by users located in Spanish territory.
Who are the taxpayers?
The taxpayers of this tax are the legal persons and entities referred to in article 35.4 of Law 58/2003, whether established in Spain, in another Member State of the European Union or in any other State not belonging to the European Union, who, at the beginning of the settlement period, exceed the following two thresholds:
– That the net amount of its turnover in the previous calendar year exceeds 750 million euros; and
– That the total amount of their income derived from the provision of digital services subject to tax in Spanish territory corresponding to the previous calendar year exceeds 3 million euros.
In the case of entities that are part of a group, the threshold amounts will be those of the group as a whole. And if the group exceeds these thresholds, each and every entity within the group will be considered a taxpayer, regardless of the amount of income derived from the provision of digital services.
What types of digital services will be taxed under the Google Tax?
The IDSD will tax those digital services that require user participation for the creation of value for the company providing the services, since the company can then monetize these user contributions.
The Google Law will exclusively tax the following digital services:
- Online advertising services: the inclusion in a digital interface, whether owned by the company or by a third party, of advertising directed to the users of that interface,
- Online intermediation services: the provision of a multifaceted digital interface that allows users to locate other users and interact with them on a recurring basis, or even facilitates the delivery of goods or underlying services directly between those users
- Data transmission services: the transmission for consideration, including the sale or transfer, of data collected about users, which has been generated by activities carried out by the latter in digital interfaces.
Therefore, the following digital services, among others, are not subject to tax:
- The sales of goods or underlying services that take place between users within the framework of an online intermediation service, such as buying and selling on Wallapop.
- Sales of goods or services contracted online through the website of the supplier of those goods or services where the supplier does not act as an intermediary, such as when you buy a product on the manufacturer's website.
How is it determined that the user's intervention is located in Spanish territory?
Digital services will be deemed to be provided within the territory where the tax applies when the device used by a user at the time of service provision is located within that territory. The location will be determined by the device's IP address, unless another location can be demonstrated using other geolocation tools.
How will the tax be calculated?
The taxable base of the tax will consist of the amount of income, excluding VAT, obtained by the taxpayer for each of the digital services subject to it, carried out in Spanish territory.
For calculation purposes, rules are established to be able to tax exclusively the part of the income that corresponds to users located in the territory of application of the tax in relation to the total number of users.
The tax levied will be at a rate of 3 percent, it will accrue when the taxable operations are provided, executed or carried out, and the settlement period will be quarterly.
What will be the tax obligations of taxpayers?
Taxpayers subject to the IDSD will be required to register in the registry created for the purposes of this tax by the Administration, to periodically submit information relating to their digital services, to establish the systems and mechanisms that allow determining the location of users' devices in the territory of application of the tax, among other obligations.
Failure to comply with these obligations will be punishable by a fine of 0.5 percent of the net amount of turnover of the previous calendar year, with a minimum amount of 15,000 euros and a maximum of 400,000 euros.
When will the tax start being applied?
The Digital Services Tax (DST) Act is expected to be approved by Congress in the coming weeks, with the tax likely to be implemented by the end of this year. However, the DST will be a temporary measure until the European Union Directive establishing the rules for taxing companies with a digital presence comes into effect.
If you require further information or have any questions, please contact us via email at ambit@ambitassessor.com or at our offices.
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A graduate in Business Administration from the University of Barcelona, she continued her education with a Postgraduate Diploma in Accounting and Management Control from Pompeu Fabra University, and completed various courses in tax and fiscal matters offered by the Terrassa Chamber of Commerce, the Barcelona Bar Association, and the Center for Financial Studies. Before joining Àmbit Assessor in 2001 as a tax and accounting consultant, she worked as an administrative assistant at Caixa Manresa and Banc Sabadell and as a tax information call center operator at the Spanish Tax Agency. For three years, she served as treasurer of the L'Alzinar Recreational and Cultural Society, a position she held concurrently with her work at Àmbit Assessor.
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