The Judgment of the Spanish Supreme Court of 10 November 2016 (in Egeda et. al.) required the Spanish Government to incorporate the requirements set out by the CJEU in its Judgment of 9 June 2016 (EGEDA et al. v. Spanish State) into the national legislation regarding private copying.
In the latter Judgment, the CJEU held that the private copying compensation model established in Spain in 2012 was contrary to EU Directive 2001/29/CE because it was financed from the General State Budget, meaning that it was not possible to ensure that the cost of compensation was not being borne by commercial resellers and professional users. The CJEU held that any such system must ensure that the cost of compensation is only borne by users of private copies, and not by other parties.
In this scenario, the Spanish Government has felt obliged to return to a system of private copying compensation based on a levy on recording and storage devices, similar to that which existed prior to 2012.
To that end, a new Royal-Decree-law (num. 12/2017) has been issued by the Spanish Government on July 3rd, 2017, by which the Spanish Copyright Act is modified regarding the private copying compensation system. Royal-Decree-law 12/2017 was published in the Spanish State's Official Bulletin (BOE) on July 4th, 2017, it was validated in Congress on July 11th, 2017 and will enter into force on August 1st, 2017.
The Royal Decree-law sets out the framework of the new system, the general principles of which were expected to be in line with the recent decisions of the CJEU and the Spanish Supreme Court.
The basic principles and language used in the Royal Decree-Law resemble the version of art. 25 of the Spanish Copyright Act that was in force until 31 December 2014 (the rules which preceded those now being amended).
The products that will be subject to the levy are equipment, devices and media capable of reproducing books and other publications, phonograms, videograms or other sound, visual or audio-visual formats, which are manufactured in Spain, or acquired abroad for commercial distribution or use in Spain.
Equipment, devices and media for reproduction clearly intended for professional use will not be subject to the requirement to pay fair compensation for private copying; nor will the purchase of such equipment by public bodies be subject to the levy.
The amount of fair compensation to be paid shall be calculated on the basis of the damage caused to the entitled parties as a result of the reproductions made under the exception to the right of reproduction provided for in Article 31, paragraph (2) and (3). Among others, the following objective criteria shall be taken into account: the volume of copying and the storage capacity of the devices levied; the relative importance of the device's reproduction function compared to its other functions, the impact of the legal exception to private copying on the sale of copies of the works in question, the unit price of each work reproduced, the nature of reproductions made (i.e., whether they are digital or analogue), the quality and duration of storage of the copies, the availability, degree of application and effectiveness of technological measures for avoiding the making of unauthorised copies, and the amounts of fair compensation for private copying that may be applied in other Member States of the European Union.
According to new art. 25.3 of the Spanish Copyright Act, the "debtors" of the private copying compensation levy are the manufacturers in Spain of equipment, devices and media, insofar as they act as commercial distributors, as well as purchasers outside of the Spanish territory for their commercial distribution or use within Spain. This means that the levy will only apply when the "equipment, devices and media" in question are sold or intended for sale in Spain (manufacturers are subject to the levy only "insofar as they act as commercial distributors" in Spain), so the issue of double payment in cross-border transactions should not arise where a product crosses a national border within the EU.
Likewise, the distributors, wholesalers and retailers, who are subsequently purchasers of the aforementioned equipment, devices and media shall be jointly responsible for the payment of the compensation, regarding the debtors who have supplied them to them, unless they prove that they have actually paid to them the compensation. Thus, in a chain of consecutive sales/resales, the debtor of the levy is the first seller in the Spanish market, but subsequent resellers are jointly responsible.
Regarding the time of triggering of the payment obligation, the amended art. 25.6 of the SCA provides that "The obligation to pay the compensation provided for in paragraph 1 of this article shall arise in the following cases: a) For manufacturers, as long as they act as distributors and for the purchasers of equipment, devices and media outside of the Spanish territory destined to their commercial distribution in the latter, at the moment in which the transfer of the property occurs on the part of the debtor or, as the case may be, the transfer of the use or enjoyment of any of them; b) For the purchasers of equipment, devices and media outside of the Spanish territory destined to its use within that territory, from the moment of its acquisition."
The spirit of the legal rule is that -once this legal regime enters into force- the triggering of the payment obligation arises when a levied device is introduced on the Spanish market for the first time (either by a manufacturer or an importer who sells the device), unless the seller has evidence that a levy had been already paid before for the specific device.
Legal or physical persons not exempted from the levy will be able to request reimbursement should they be able to demonstrate (i) professional use of the equipment, device or media purchased; or (ii) that the equipment, devices or media purchased is intended for export or intra-EU delivery.
Distributors in Spain must charge the copyright levy to all purchasers, except for those who (i) are legally exempt (e.g., because they put the devices exclusively to a professional use) and (ii) have obtained a written certification issued by the managing entity to be created by the collective societies (after having justified to this entity being entitled to the exemption)(art. 25.7.b SCA) .
In absence of this certification, the legally exempt purchasers will have to first pay the device with the levy included in the price and later ask for re-imbursement (art. 25.7 in fine).
As the re-imbursement request will have to be assessed by the managing entity to be created by the collecting societies, which will control on a case-by-case basis whether the legal requisites for benefiting from the exemption are met, professional end users will not be able to assign their claim of re-imbursement upfront to their suppliers (distributors) so these could set it off in the purchase price.
A controversial point is that control by collecting societies over the purchases of equipment that may be exempted from payment of the levy (under new art. 25.7.b SCA) is too restrictive. The way to prove entitlement to rely on the exemption should not be a certification issued by the collecting societies, as this presents a clear conflict. At the very least, this form of certification should not be the only acceptable form of proof. Alternative ways of proving entitlement to rely on the exemption should be accepted, and might include, for example, an affidavit or declaration by the end-user himself, or a certification issued by a public authority or administrative body, etc. In fact in other areas of tax law, the taxable person is the one that declares the circumstances applicable to his tax declaration, which may be later subject to inspection by tax authorities.
The specific devices which will be levied and the concrete amount payable in respect of each type of levied device will be finally and definitively determined by future implementing legislation. However, in the meantime and until such legislation is approved (the Ministry of Education, Culture and Sport must follow a consultation process with interested parties), a transitory regime is provided under the Second Transitional Provision whereby a list of devices levied and amounts of the levy in the transition period is immediately applicable from August 1st, 2017.
Royal Decree-Law 12/2017 it is not clear on whether the definitive list of devices and applicable prices will be approved through a Royal Decree (by the Government) or through a Ministerial Order (by the Ministry of the Presidency and for the Territorial Administrations). New article 25.4 of the Spanish Copyright Act (as amended by the Royal Decree-Law) provides it will be through a Ministerial Order; whereas the First Final Provision of the Royal Decree-Law provides it will be done through a Royal Decree.
There is no retroactivity provision
The Royal Decree-Law simply states that it will come into force "the 1st day of the following month after its date of publication", that is, on August 1st, 2017. From that date, all devices listed in the Second Transitional Provision of the Royal Decree-Law, are subject to the new levy… Until such list of devices/prices is amended or changed by a definitive piece of legislation within one year (be it through a Royal Decree or by a Ministerial Order).
Reporting by debtors of levies due
It is important to note that the payment of the levy will be self-assessed by the debtor (it is the debtor who has to present a quarterly report of levied devices to the entity designated by the collecting societies). So, the decision on whether or not to include a particular device in the report belongs to the debtor. Since the event which accrues the levy is acquisition of a device for use in Spain, only finished products (which end up in the market) will be in fact "visible" for compensation purposes.
Such report is due within the 30-day period following a calendar quarter. It must include the device units which have accrued the levy and the total amount of the levy to be paid.
Importers must present the quarterly report in the 5 calendar days following the triggering of the obligation.
Distributors, wholesalers and retailers who are subsequent buyers of levied devices, will have to report (quarterly) those devices in which invoices the levy was not reflected as paid by their providers.
The entity receiving the quarterly reports will distribute them to the corresponding collective societies (depending on the type of device) and each collecting entity receiving this information will issue the corresponding invoices for payment of the compensation due by each debtor. The collecting societies will carry out a centralized –and unified- communication of invoicing to debtors, through the designated managing entity.
Payment of the invoiced amounts will be due in the next month following the end of the period provided for the presentation of quarterly reports by the debtors.
Debtors and jointly liable persons must pass on (and reflect separately) the levy in the invoices to their clients for the subject devices; and they shall indicate to their clients (when they are final users) that they might be entitled to obtain reimbursement of the levy if they fulfill the requirements provided in art. 25.8 of the SCA.
When the amount of the compensation is not separately reflected in an invoice, it shall be presumed, unless proven otherwise, that the compensation accrued for the equipment, devices and media included therein, has not been paid.