Spanish government approves digital services tax targeting large multinationals

The Spanish government approved on Feb 18, 2020 a bill for a digital service tax for discussion by the parliament.

The Spanish government is engaged in international discussions to address the tax challenges of the digital economy but the government also maintains that the new tax is needed because the current international income tax regime applicable to multinational companies results in under taxation. The reality is that the tax must be approved now, before the budget is approved, due to the need for increased revenues to fund increased public spending already adopted by the government for 2020.

The Spanish government has a majority consensus on the new tax, and it is, therefore, very likely to pass, though amendments may be incorporated before the approval of the final version.

Also, for the moment, it is unclear what the effective date of the controversial new tax obligation will be. If the OECD reaches a deal by the end of 2020, then Spain´s unilateral tax would not be applied at all, but If there is no multilateral agreement by then, Spain will collect the tax at the end of the year. The question is if the payment is delayed, the Spanish government will need to find other revenue for funding public spending.

Source MNE Tax