In January 2019 the Spanish Government published its draft DST Bill. However, due to the current political situation in Spain (i.e. lack of government) the Bill has not yet been approved, and there is uncertainty as to how and whether this legal initiative will progress.

The Spanish Government has projected that it will raise €1.200m per year through DST.

The main features of this draft bill are as follows:

• DST is acknowledged to be an indirect tax and as such it would not fall within the scope of Double Taxation Treaties signed.

• Entities which meet the following requirements: (i) net revenues during the prior calendar year exceeding €750 million, and (ii) the total value of revenue derived from the development of the activities subject to DST in Spain exceeds €3 million.

The entities are not required to be established in Spain.

In the case of corporate groups these requirements would be assessed at the group level. Thus if both requirements are met on a group level, every group company providing the relevant digital services in Spain would be liable to DST regardless of the individual amounts of revenue.

• Taxable revenues are those arising from the following activities: (i) online advertising services; (ii) data transmission services; and (iii) intermediation services.

• Location of the users of the services: digital services are deemed to have been carried out within the Spanish territory whenever the user is located in Spain. Particular localization rules have been set for each type of taxable digital service.

• Taxable base: overall revenues obtained from the aforementioned activities, exclusive of VAT, constitute the DST taxable base.

• Tax rate: Spain has also decided to adopt the rate suggested by the EU proposal and the DST will apply at a rate of 3 per cent.

• Tax returns/forms: DST returns would be filed on a quarterly basis.

The Spanish DST Bill acknowledges that the foregoing rules are aimed at covering an intermediary period until the European DST Directive is finally approved, in which case local regulations would be amended accordingly.