Tax Legislation in the Field of Digital Services

The Spanish Government published a draft law imposing a tax on digital services in Spain, thereby initiating a formal parliamentary procedure to introduce this measure. The goal of this law is to avoid unfair competition with traditional businesses.

To whom it will apply?

The proposed tax on digital services, approved by the Spanish Cabinet on 18 February 2020, is an indirect tax compatible with VAT. The tax applies to both resident and non-resident companies (both within and outside the EU) whose income exceeds certain thresholds. It will apply a 3% tax on certain digital services provided by companies with a total annual turnover of 750 million euros and Spanish revenues from such services of 3 million euros.

It should be noted that, unlike the EU proposal, transactions between enterprises, cross-border and domestic transactions are taxed. The tax will apply to revenues from online advertising services, online brokerage services and sales of user data.

Information to submit

Among other things, companies must regularly submit the information requested by the tax authorities in connection with the calculation of tax on digital services, or keep all documents in support of service operations carried out in Spain. If a company is not established in Spain, it must appoint a tax representative to pay the DST instead. The bill also provides penalties for non-compliance.

Taxpayers who liable for this tax will not have to make the first payment by 20 December 2020, in order to give countries time to agree on a common digital tax system under the leadership of the OECD (Organisation for Economic Cooperation and Development).

Purpose vs. practice

The proposed tax on digital services was designed to take into account large and high-income companies such as Google or Facebook, but in practice, the tax on digital services will be passed on to consumers. Therefore, the tax will not achieve the purpose for which it was created.

The draft bill of law was published in the Official Gazette on 28 February 2020 and has not been changed from the proposals approved by the government on 18 February.


GM Tax Consultancy remains at your disposal for any doubts or clarifications regarding this new law. If you have any further questions, you can contact us by email.

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