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Spain’s Proposed Digital Services Tax Aligns with European Proposal

Jessica Silbering-Meyer  

· 5 minute read

Jessica Silbering-Meyer  

· 5 minute read

On January 28, 2019, the European Commission (EC) issued a letter to Spain regarding Spain’s 2019 draft budget law, which has been presented to the Spanish Parliament. See draft Law No. 121/000039 on the proposed DST. According to the letter, the EC generally agrees with Spain’s conclusion that its proposed new tax on certain digital services (DST) is in line with the EC’s proposals.


On October 15, 2018, Spain’s government issued its 2019 Budget Plan, which includes proposed legislation on the DST. The DST would tax income earned in Spain by large international companies from certain digital activities beyond the current fiscal framework.

The 3% tax would be directed at certain digital services in which user participation is essential in value creation for the company providing the services, and the company profits on these user contributions. The tax would be levied on services from online advertising, online intermediation, and data transmission.

Subject to the DST would be legal persons and other entities whose net turnover in the previous calendar year exceeds €750 million and whose income from services subject to this tax in Spain exceeds €3 million in the previous calendar year. The tax base will include revenue, excluding value added tax or other equivalent taxes.

On March 21, 2018, the EC proposed a DST to address the tax challenges of the EU’s digital economy. The DST would be an interim tax of 3% on the main digital activities that currently escape tax altogether in the EU. This interim tax would apply to revenues created from activities where users play a major role in value creation, such as from (1) selling online advertising space, (2) digital intermediary activities (which allow users to interact with other users and which can facilitate the sale of goods and services between them), and (3) the sale of data generated from user-provided information.

Under the EC’s proposal, the interim tax would apply only to companies with total annual worldwide revenues of €750 million and EU revenues of €50 million. According to the EC, an estimated €5 billion in annual revenues could be generated for member states if the tax is applied at a rate of 3%.

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