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Spain: Analysing new bills on digital services and financial transactions

Álvaro de la Cueva and José Carlos Ruiz of Garrigues open up on the provisions of two new bills which are commencing passage through parliament.

The Official Parliamentary Gazette of February 28 2020 published the initiation of the passage through parliament of two relevant bills: one on the tax of certain digital services (also known as the ‘Google tax’) and the other one on the financial transactions tax (also known as the ‘Tobin tax’).

The wording of both bills substantially coincide with that of the bills approved in January 2019 by the Council of Ministers, which was not processed due to the dissolution of the parliament after the call for elections.

We summarise below the main characteristics of both taxes. 

Tax on certain digital services

The preamble of the bill recalls that this tax is temporary until the OECD completes its work on adapting the international tax system to the digitalisation of the economy (clear reference to pillars one and two of the OECD).

This tax, configured as an indirect tax, applies to companies (i) whose global net revenues are above €750 million and (ii) that obtain revenues in Spain of at least €3 million derived from the provision of digital services (both referred to the preceding calendar year). Digital services include the provision of (a) online advertising services, (b) online intermediation services or (c) the sale of data generated based on information provided by the user of digital interfaces.

The envisaged tax rate is 3%. 

The scope of the tax excludes, among others: sales of goods or services between users in the context of an online intermediation service, sales of goods or services contracted online on the website of the supplier of those goods or services in which the supplier does not act as intermediary or digital services between entities forming part of a group with 100% direct or indirect holding.

Although the tax will be assessed every three months, the first assessment in 2020 has been postponed until December 2020.

Financial transaction tax

The tax continues to be designed as an indirect tax charged at 0.2% on acquisitions for a consideration of shares in listed Spanish listed companies with a market capitalisation of over €1,000 million on December 1 of the preceding year. The list of companies whose shares fall within the scope of the tax would be published on the State Tax Agency’s webpage.

Pursuant to the so-called ‘issuance principle’, the tax would be levied on any acquisition of shares issued by Spanish listed companies that meet the requirements, regardless of where the acquisition is made and of the residence or place of establishment of the individuals or entities that participate in the transaction. The tax would also be levied on acquisitions of certificates of deposit (such as American depositary receipts (ADRs), in US nomenclature) and acquisitions deriving from the execution or liquidation of convertible or exchangeable debentures or derivative financial instruments, among others, with certain particularities.

Important exemptions are included. The following may be highlighted: (i) acquisitions on the primary market (issues of shares and public offerings), (ii) those carried out between entities forming part of the same corporate group, (iii) acquisitions qualifying for the special regime for mergers, spin-offs and contributions of assets (including mergers and spin-offs of collective investment undertakings).

The party liable for the tax would be the acquirer of the shares. However, the taxpayer or, as the case may be, the substitute taxpayer that must pay over the tax to the State Tax Agency would be the financial firm or credit institution, depending on the circumstances. Although the tax would be chargeable, in general terms, upon execution of the transaction, a monthly assessment period is established.

The entry into force is set for three months after the publication of the law in the Official State Gazette.

Given that these are bills that are commencing passage through parliament, the wording could undergo changes, so it will be necessary to monitor them until the laws are approved and published in the Official State Gazette. 


Álvaro de la Cueva 

José Carlos Ruiz 

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