Global Tax Alert | 17 May 2018

Spain proposes a Digital Services Tax to be effective in 2018

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Executive summary

On 30 April 2018, Spain released its 2018 Stability Programme and Budgetary Plan Update (the 2018 program update), which proposes the introduction of a Digital Services Tax (DST) to be effective in 2018 and onwards. Even though no draft of this proposed new tax has been released yet, it will presumably be aligned with the proposal made by the European Union (EU) to tackle challenges of taxing digitalized business.1

Detailed discussion


In recent years, the main players in the international tax field – in particular, the Organisation for Economic Co-operation and Development (OECD) and the EU – have addressed the challenges of the digital economy, with the goal of ensuring that multinational digital companies contribute to the tax revenues of the territories where they are, de facto, carrying out their business.

The response given at the EU level to the challenges of taxing digitalized business was released on 21 March 2018, when the EU Commission issued the Digital Tax Package, in the form of two proposals for new Directives, focused on a two-phased approach, including: (i) an interim solution, referred to as the Digital Services Tax (The DST or DST proposal); and (ii) a longer term Council Directive laying down rules relating to the corporate taxation of a significant digital presence (SDP or the Significant Digital Presence proposal).2

Briefly, the DST proposal foresees a temporary, in the sense that it will apply only until the SDP solution has been implemented, 3% tax over gross revenues derived from the following digital activities:

  • Selling online advertising space
  • Digital intermediary activities which allow users to interact with other users and which can facilitate the sale of goods and services among them
  • The sale of data generated from user-provided information

The DST, as proposed by the EU, would only apply to companies with total annual worldwide revenue of at least €750 million and EU revenue of €50 million or more.

There is no certainty as when the EU DST proposal will be ultimately approved, especially considering that certain EU Member States have expressly manifested that they prefer a harmonized OECD approach rather than introducing a unilateral measure by the EU.

While the EU Commission acknowledges that the ideal approach would be to find multilateral, international solutions to taxing the digital economy, given the global nature of this challenge, the OECD in their 16 March Interim report on tax challenges arising from digitalization3 note that “There is no [global] consensus on the need for, or merits of, interim measures, with a number of countries opposed to such measures on the basis that they will give rise to risks and adverse consequences.” The OECD further noted that an update on this [OECD] work will be provided in 2019 and that the BEPS Inclusive Framework (BEPS IF)4 members are working towards a consensus-based solution by 2020.


In this context, on 5 April 2018, the Spanish 2018 draft Budget Law was published in the Spanish Parliamentary Official Gazette. The Government committed to increased social spending (in particular, mainly state pensions) and to cut public deficit to nil by 2021. In order to be able to meet these commitments, the Government requires additional sources of income.

In this regard, in the 2018 program update sent to the EU Commission on 30 April 2018, Spain announced its intention to introduce a Spanish DST by the end of 2018 (potentially applicable in 2018), with the objective of taxing digitalized companies in the jurisdiction where their added value is generated. Even though no draft of this proposed new tax has been released yet, the announcement states that Spanish DST will follow the features of the EU proposal.

Finally, it is important to note that Spain has not made any announcement yet on the implementation of a new definition of what will constitute a permanent establishment due to a significant digital presence, along with revised profit allocation rules, as per the EU SDP proposal. We understand that Spain will wait until further approval of this Directive by the EU.


Considering the lack of consensus between EU Member States on the introduction of an interim DST, the next steps in the approval process will be significant in determining whether this tax will be implemented at an EU level.

Similarly, the outcome of the OECD work with respect to the digital economy should be carefully monitored.

With respect to Spain, it is still uncertain when the proposed wording of the DST will be published. Once available, this would have to be analyzed in detail to confirm whether the main features of the new tax deviate from the EU DST proposal. In particular, it will be key to identify which digital services would fall under the scope of the new tax and which thresholds would apply.

In the meantime, multinational digital companies with a business presence in Spain should start considering the potential impact that this new tax could have on their business model.


1. See EY Global Tax Alert, European Commission issues proposals for taxation of digitalized activity, dated 21 March 2018.

2. Ibid.

3. See EY Global Tax Alert, OECD releases interim report on the tax challenges arising from digitalization, dated 16 March 2018.

4. The Inclusive Framework on BEPS brings together over 100 countries and jurisdictions to collaborate on the implementation of the OECD/G20 BEPS Package.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Abogados, Madrid
  • Castor Garate
  • Tatiana de Cubas
Ernst & Young LLP, Spanish Tax Desk, New York
  • Jose A. (Jano) Bustos
  • Isabel Hidalgo

EYG no. 02714-181Gbl