By Alma Delia Virto Aguilar, Postdoctoral fellow at the University of Valencia and Professor, International Taxation LLM, UNIR
The Spanish tax office has postponed its tax on digital services for the first and second quarters of 2021 to July 2021 to be in line with the OECD deadlines and to reach an international consensus on taxing the digital economy. The delay also provides for the introduction of a new digital levy from the European Union.
The digital tax regulated by Law 4/2020 has been in force since January 16, 2021. Since the self-assessment is quarterly, it means that before the government delay, the first income tax return should have been completed in April 2021.
On December 15, 2020, the Spanish Ministry of Finance published a draft regulation approving the official form for submitting the self-assessment of the tax on digital services. The proposal was publicly heard on December 30, 2020. However, it has not yet been approved.
At the center of this shift is the expectation that an international consensus will be achieved through the integrative framework of the OECD (IF). IF BEPS has agreed to work on a multilateral proposal for taxing digital business. In line with this work, the OECD published a general plan in October 2020 based on two pillars. Pillar 1 focuses on defining new nexus and allocation rules. For their part, the Pilar Two are striving to reach an agreement on a global minimum tax rate. On the basis of these proposals, the IF expects an agreement in mid-2021.
The European Commission is also working to develop a digital levy that will allow a fairer contribution from companies operating in the digital sector. In the first quarter of this year, the Commission carried out a feedback process with an impact assessment and a public consultation so that all stakeholders can give their views on the new digital tax.
Further details on the design and implementation of this new digital tax in the EU were announced on May 18 with the communication on "Corporate taxation for the 21st century". It would coexist with the OECD global consensus on sharing a fraction of the tax base of the largest multinational corporations. It should be independent of the future global agreement on international corporate tax reform and be compatible with the WTO and other international obligations. The first proposal on the digital tax is expected in July 2021.
What is the future of Spanish taxes on digital services? This tax provision does not contain a so-called sunset clause, which provides for the expiry of the tax if an agreement has been reached at OECD or EU level. However, the Spanish legislature has announced its intention to introduce this tax as a temporary measure pending an international solution.
In any case, the tax introduced in the international consensus and in the EU will certainly be determined by a directive and later transferred to the Spanish legal system. Therefore, the Spanish tax on digital services is likely to be reformed to adapt or deviate according to the approved directive.
Alma Virto is a Ph.D. in International Tax Law from the University of Salamanca, Spain.
Alma has worked as a tax attorney on the Mexican Supreme Court. a tax advisor in Spain for companies with investments in Latin America; a director in the Tax Department of the Attorney General in the Treasury; and a tax manager at Deloitte, Mexico.
She was also a visiting researcher at the Institute for Fiscal Studies in Spain and Queen Mary University in London.