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Tax implications of e-commerce in Spain

3.1 Problems, general principles and initiatives taken in relation to taxation

Except for Spain’s commitments to the European Union (“EU”) on value added tax (“VAT”), at present there is no tax regime in Spain that specifically regulates the trading of goods and services on the Internet. Therefore, the same taxes and the same rules as those for other forms of commerce apply to e-commerce. This approach is in tune with the principles enunciated by the Spanish Tax Agency in the Report of the Commission analyzing the impact of e-commerce on the Spanish tax system, prepared by the Office of the Secretary of State for Finance.

Below is a list of the basic pieces of VAT legislation emanating from the EU:

  • Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. Council Directive 2008/8/EC of 12 February 2008 has amended Directive 2006/112/EC as regards the place of supply of services, introducing, in particular, rules applicable to telecommunications, broadcasting and electronically supplied services, with effect from January 1, 2015. In addition, Directive 2017/2455, of 5 December, 2017, introduces some amendments as regards certain VAT obligations for supplies of services and distance sales of goods. However, these changes will be applicable with effect from 1 January 2019 (those related to supply of services) and 1 January 2021 (those related to distance sales). For the time being, these changes are pending to be implemented in the Spanish regulations.
  • Council Implementing Regulation (EU) No 282/2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax. This Regulation has been amended by Council Implementing Regulation (EU) No 1042/2013 of 7 October 2013 as regards the place of supply of services. Also Regulation 2017/2459 has amended the Regulation 282/2011, with effect from 1 January 2021, in order to introduce some simplifications for small businesses.
  • Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax, which recast Council Regulation (EC) No 1798/2003 of 7 October 2003 on administrative cooperation in the field of value added tax and repealing Regulation (EEC) No 218/92 on administrative cooperation in the field of indirect taxation (VAT), in respect of additional measures regarding electronic commerce. In addition, this Regulation has been amended by the Regulation 2017/2454, in order to introduce changes concerning the provision of information and transfer of money between the Member State of identification and the Member States of consumption.
  • Council Regulation (EU) No 967/2012 of 9 October 2012 amending Council Implementing Regulation (EU) No 282/2011, as regards the special schemes for non-established taxable persons supplying telecommunications services, broadcasting services or electronic services to non-taxable persons. Among other matters, this Regulation regulates the existence, starting January 1, 2015, of a single point of electronic contact for suppliers of EU electronic, telecommunications, and broadcasting services which will enable enterprises to declare and pay over the VAT in the Member State where they are established rather than doing so in the customer’s country.

The provisions of these pieces of legislation and their transposition into Spanish law are examined in the section on the indirect taxation of e-commerce.

Nowadays, member countries of the Organisation for Economic Co-operation and Development (OECD) and the G20 are working on the developing and implementing of international standards in tax matters. This work has its origin in the 15 measures of the Action Plan against of the Base Erosion and the Profit Shifting (BEPS Action Plan) published in 2013. Action 1 of this project (Addressing the tax challenges of the Digital Economy,OECD, 2015) addresses the current fiscal challenges of the digital economy.

The EU has also been concerned about the growing digital economy of our day. In this sense, it has long promoted the European Strategy eEurope002 (now eEurope2020) which encourages e-commerce. It has also set up a group of experts on taxation of the digital economy whose first report took place in May 2015 entitled “Commission Expert Group on Taxation of the Digital Economy”. This report refers, among others, to the BEPS Action Plan, as well as, in tax matters, to Corporate Income Tax and VAT.

It is also worth noting that last December 2016, the European Commission published four legislative proposals relating to different aspects of the tax treatment of e-commerce transactions in their broadest sense, in the context of the Action Plan contained in the Communication to the European Parliament, to the Council and to the Economic and Social Committee dated 7 April 2016

The proposals put forward by the Commission have a dual aim: on the one hand, in light of the successful functioning of the special reporting regime system applicable to the services provided electronically, telecommunications, radio broadcasting and television services, through the Mini One-Stop Shop, it proposes extending this system to other types of e-commerce transactions (with both goods and services); on the other hand, it seeks to improve and simplify the system in light of the experience of the last two years.

3.2 Direct taxation

Despite there being no differences in the tax treatment of income obtained electronically, the following chart shows the main potential issues of contention in the area of e-commerce (Table 1).

Table 1

MAIN CONTENTIOUS ISSUES IN RELATION TO DIRECT TAXATION
a. The permanent establishment problem.
b. Legal characterization of the income generated from the sale of goods and services on the Internet.
c. Determination of taxable income and transfer pricing problems
d. Application of the place-of-effective-management rule to determine the tax residence of taxable persons engaging in e-commerce activities.

The most relevant considerations and the progress made in analyzing those issues are summarized below:

3.2.1 The permanent establishment problem

The issue concerns whether the paradigmatic elements of e-commerce, such as a server, a website, etc., can be deemed a permanent establishment (“PE”) in the country where a company supplying a good or service on the Internet is located:

The Commentary published in July 2014 on article 5 of the OECD Model Tax Convention (concerning the definition of permanent establishment) remains unchanged from that published in 2003, in which the elements defining the new forms of commerce were already foreshadowed.  Based on the observations made in the Commentary, the following chart shows the scenarios in which a PE can be deemed to exist and those in which it cannot (Table 2).

Table 2

PUEDE CONSTITUIR EP CANNOT CONSTITUTE A PE
Server Software
Website
ISP (Internet Service Provider)
Hosting

The reasons justifying the characterization of a PE in each case are as follows:

  • A computer or server can constitute a PE whereas the software used by that computer cannot. This distinction is important because the entity that operates the server hosting the website is normally different from the entity that engages in the online business (hosting agreements).

In order to characterize a server as a PE, regard must be had to the following considerations:

  A server will constitute a fixed place of business only if it is permanent and located in a certain place for a sufficient length of time. What is relevant here is whether it is actually moved from one place to another, rather than whether it can be moved. A server used for e-commerce can be a PE regardless of whether or not there is personnel operating that server, since no personnel is required to perform the operations assigned to the server.

  In determining whether or not the server installed by a given enterprise in a country constitutes a PE, it is particularly important to analyze whether the enterprise engages in business activities specific to its corporate purpose through that server, or whether, on the contrary, it only engages in activities of a preparatory or auxiliary character (such as advertising, market research, data gathering, providing a communications link between suppliers and customers, or making backup copies).

  • A website does not, in itself, constitute tangible property and, therefore, cannot be deemed a “place of business,” defined as facilities, equipment, or machinery capable of constituting a PE. ISPs do not generally constitute a PE of enterprises that engage in e-commerce through websites since ISPs are not generally dependent agents of those nonresident enterprises.

3.2.2 Legal characterization of income

The second relevant issue is the characterization of income and, in particular, the possibility that certain goods supplied online may, merely by virtue of the fact that they are protected by intellectual or industrial property laws (such as music, books and, particularly, software), be characterized as generators of royalties and, therefore, be taxable in the country of source.

The Commentaries on the OECD Model Tax Convention characterize as business profits (instead of royalties) almost all payments made for all intangible goods delivered electronically, on the ground that the subject-matter of those transactions are copies of images, sounds or text, rather than the right to exploit them commercially.

Initially, Spain included an observation on the relevant Commentary on the 2003 Model Tax Convention qualifying the treatment of the acquisition of rights to software by arguing that payment for those rights could constitute a royalty. Specifically, Spain considered that payments relating to software were royalties where less than the full rights to it were transferred, either if the payments were in consideration for the use of a copyright on software for commercial exploitation or if they related to software acquired for business or professional use when, in this latter case, the software was not absolutely standardized but somehow adapted to the purchaser.

However, the relevant Commentary on the OECD Model Tax Convention published in July 2008 takes the novel line that payments made under arrangements between a software copyright holder and a distribution intermediary do not constitute a royalty if the rights acquired by the distributor are limited to those necessary for the commercial intermediary to distribute copies of the software. Thus, if it is considered that distributors are paying only for the acquisition of the software copies and not to exploit any right in the software copyrights (without the right to reproduce the software), payments in these types of arrangements would be characterized as business profits. The Commentary published in July 2010 maintains this position.

In light of this change in the Commentary on royalties in the Model Tax Convention, Spain introduced a qualification in its observations on the Commentary published in July 2008 (which was kept in the Commentary on the OECD Model Tax Convention published in July 2010), indicating that payments in consideration for the right to use a copyright on software for commercial exploitation constitute a royalty, except payments for the right to distribute standardized software copies, not comprising the right to customize or to reproduce them.

Therefore, as acknowledged by the Directorate-General of Taxes in its binding ruling of November 10, 2008 and other subsequent rulings, Spain considers that payments made for the right to distribute standardized software copies are business profits, although it continues to treat as royalties any payments made for the right to distribute software where the software has been adapted. In any case, as was clarified in a binding ruling of November 23, 2010, the transfer, together with the distribution right, of other rights, such as a license to adapt the software being distributed, will mean that the payments are treated as royalties.

It should also be noted that article 13 of the Revised Nonresident Income Tax Law, approved by Legislative Royal Decree 5/2004, of March 5, 2004, treats as royalties amounts such as those paid for the use of, or the right to use, rights in software.

Also, in some tax treaties signed by Spain, income derived from the licensing of software is expressly characterized as a royalty. In this regard, one should note the Supreme Court judgment of March 25, 2010, which defined the licensing of software as a license of the rights to exploit a literary work, although the Court’s definition addressed a situation pre-dating the entry into force of the Spanish legislation specifically listing the items deemed to be royalties. However, in a judgment dated March 22, 2012, the National Appellate Court held that such a definition was no longer possible after the entry into force of the above-mentioned legislation. The Supreme Court confirmed this view in a judgment handed down on March 19, 2013, in which it held that characterization as a literary work is no longer correct after the change in the legislation.

3.2.3 Determination of taxable income and transfer pricing problems

The widespread use of intranets among different companies belonging to multinational groups, and the enormous mobility of transactions over computer networks, create highly complex problems when applying the traditional arm’s-length principle to pricing transactions within groups. This has been accentuated by the increase in transactions between group companies and the downloading of digital content or of free services.

Accordingly, the tax authorities of OECD countries (including Spain) are advocating the development of bilateral or multilateral systems for advance pricing agreements, applying the OECD transfer pricing guidelines to e-commerce. Noteworthy in this regard is the creation of an EU Joint Transfer Pricing Forum in which, among other matters, non-legislative measures are being proposed to enable a uniform application of the OECD guidelines across the EU.

In BEPS, Actions 8 to 10 of the BEPS Action Plan have the ultimate aim of ensuring that the results of transfer pricing are in line with the creation of value. The implementation of the measures of the BEPS Action Plan has not yet been done, as it is expected to be developed and implemented in 2016 and 2017.

3.2.4 Application of the place-of-effective-management rule

Due to the special characteristics of e-commerce (which include easy detachability from location, relative anonymity, and the mobility of the parties involved), the traditional rules on taxation of worldwide income, based on the principles of residence, registered office or place of effective management, are more difficult to apply to taxpayers engaging in e-commerce.

Indeed, the parameters established in the tax treaties for apportioning the revenue powers among States in the event of a conflict (most of them based on the “place-of-effective-management” principle) are exceeded in the context of e-commerce, since the various managing bodies of the same enterprise can be located in different jurisdictions and be totally mobile during the same year. It can therefore be extremely difficult to determine where the enterprise’s place of effective management is situated, and this can lead to double taxation or to no taxation at all.

Although this issue is being studied by international organizations and by the Spanish tax authorities themselves, they have yet to arrive at clear conclusions on how to resolve it. Accordingly, a close watch will have to be kept on progress with the work being done in this area.

In terms of BEPS, the ultimate aim of Action 8 to 10 of BEPS Action Plan is to ensure that the results of the transfer prices are in line with the creation of value.

3.3 INDIRECT TAXATION

It is in the area of VAT where the most relevant coordinated legislative measures have been adopted.

The indirect taxation implications for e-commerce mainly concern “online e-commerce,” a term that refers to products supplied on the Internet in digitized format (books, software, photographs, movies, music, and so on) and downloaded by a user in real time onto his or her computer, having clicked on to the supplier’s website and paid for the products in question (in contrast to offline supplies where products sold on the Internet are subsequently delivered by using conventional means of transportation). In offline e-commerce, where goods are still physically supplied, the traditional VAT concepts apply.

The main VAT issues arising in relation to e-commerce (especially in the area of online e-commerce) are basically the following:

  • The definition of “taxable event” as a supply of goods or services and the application of the resultant rules for determining the place of supply.
  • The determination of the VAT rates applicable to the different types of e-commerce.
  • The adaptation of the formal obligations and management of VAT to the realities of e-commerce and, particularly, the invoicing obligations.
  • The problems already raised in relation to direct taxation, regarding the determination of the existence of a fixed establishment and of the effective place of business, are also applicable in the area of indirect taxation. Council Implementing Regulation (EU) No 282/2011 has clarified these concepts, defining them as follows:

  “Place of establishment of a business”: the place where the functions of the business’s central administration are carried out, i.e., the place where essential decisions concerning the general management of the business are made, the place where the registered office is located or the place where management meets. The Regulation clarifies that if, having regard to the above criteria, the place of establishment of a business cannot be determined with certainty, the place where essential management decisions are made will take precedence. It also clarifies that a postal address cannot be taken to be the place of establishment of a business.

  “Fixed establishment”: any establishment, other than the place of establishment of a business, with a degree of permanence and a suitable structure in terms of human and technical resources to enable the services supplied it to be received and used for its own needs.

Each of these issues is briefly examined below:

3.3.1 Definition of “taxable event” as a supply of goods or services for the purpose of determining the place of supply

Directive 2002/38/EC was based on the premise that transactions performed electronically are deemed supplies of services:

  • Services will be deemed to be electronically supplied services where their transmission is sent initially and received at destination by electronic data processing equipment. The fact that the supplier of a service and his customer communicate by e-mail does not of itself mean that the service performed is an electronically supplied service.

In relation to the concept of “electronically supplied service”, article 7 of Council Implementing Regulation (EU) No 282/2011 further defined it by including a list of services that must be regarded as electronically supplied services and others that are not. In this regard, article 7 established that electronically supplied services are those “delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.”

Implementing Regulation 1042/2013, to which we refer above because it regulates the new rules applicable from January 1, 2015, has revised the list of electronically supplied services as set out in the following Table 3.

Table 3

ELECTRONICALLY SUPPLIED SERVICES SERVICES NOT SUPPLIED ELECTRONICALLY
a. the supply of digitized products generally, including software and changes to or upgrades of software;

b. services providing or supporting a business or personal presence on an electronic network such as a website or a webpage;

c. services automatically generated from a computer via the Internet or an electronic network, in response to specific data input by the recipient;

d. the transfer for consideration of the right to put goods or services up for sale on an Internet site operating as an online market on which potential buyers make their bids by an automated procedure and on which the parties are notified of a sale by e-mail automatically generated from a computer;

e. Internet Service Packages (ISP) of information in which the telecommunications component forms an ancillary and subordinate part (i.e., packages going beyond mere Internet access and including other elements such as content pages giving access to news, weather or travel reports; playgrounds; website hosting; access to online debates etc.);

f. the services listed in Annex I.

a. radio and television broadcasting services;

b. telecommunications services;

c. goods, where the order and processing is done electronically;

d. CD-ROMs, floppy disks and similar tangible media;

e. printed matter, such as books, newsletters, newspapers or journals;

f. CDs and audio cassettes;

g. video cassettes and DVDs;

h. games on a CD-ROM;

i. services of professionals such as lawyers and financial consultants, who advise clients by e-mail;

j. teaching services, where the course content is delivered by a teacher over the Internet or an electronic network (namely via a remote link);
k. offline physical repair services of computer equipment;

l. offline data warehousing services;

m. advertising services, in particular as in newspapers, on posters and on television;

n. telephone helpdesk services;

o. teaching services purely involving correspondence courses, such as postal courses;

p. conventional auctioneers’ services reliant on direct human intervention, irrespective of how bids are made;

q. tickets to cultural, artistic, sporting, scientific, educational, entertainment or similar events, booked online;

r. accommodation, car-hire, restaurant services, passenger transport or similar services booked online.

  • The services are deemed to have been supplied in Spanish VAT territory if:

 The recipient is a trader or professional and his place of business is in Spain;

 The supplier is established in Spain and the recipient is a non-trader residing in the EU or having an unidentifiable domicile;

 The services are supplied from outside the EU and the recipient is a non-trader domiciled in Spain;

 The recipient is a trader or professional, the services are actually consumed in Spain, and the services have not been deemed supplied pursuant to the above rules in the EU, Canary Islands, Ceuta or Melilla.

 Directive 2006/112/EC provides that starting on January 1, 2015, the electronically supplied services will be taxed in the Member State where the recipient is established, regardless of where the taxable person supplying them is established. Thus, effective that date, where the recipient, including non-traders, is established in Spain, the services will be deemed supplied in Spanish VAT territory.

In this connection, the place of supply of electronically supplied services can be summarized as follows Table 4.

Table 4

SUPPLIER RECIPIENT PLACE OF SUPPLY
EU / Non-EU Trader established in Spain Spain
EU / Non-EU Non-EU trader and actual consumption in Spain Spain
Spain Non-trader resident in the EU Spain
EU Non-trader resident in Spain Spain
Non-EU Non-trader resident or domiciled in Spain Spain (Application of special scheme)
  • As regards determining who is the taxable person, it has been decided to fully apply the current legislation (article 84 of the VAT Law), which establishes that:

  In general, the supplier of services is the taxable person, regardless of where he is established.

  In special circumstances, the recipient of the services (rather than the supplier) is the taxable person and is obliged to charge the VAT under the “reverse charge mechanism” (where the supplier is a trader not established for VAT purposes in Spain and the customer receiving the services is a trader or professional established in Spain), notwithstanding the amendments that apply from January 1, 2015 onwards.

–  Furthermore, in cases where the supplier of the services is not established in the EU and the customer is a final consumer (in business-to-consumer, or “B2C,” transactions), the supplier of the services is the taxable person. However, with a view to simplifying their obligations, suppliers only have to register (electronically) for VAT in one Member State, although they will have to charge the VAT relating to each of the jurisdictions where their customers are located and pay it over (also by telematic means) to the tax authorities of the Member State in which they are registered. Subsequently, that Member State will reapportion the VAT collected among the other countries.

Non-established traders or professionals that apply this special regime in Spain will be entitled to a refund of input VAT in accordance with the refund procedure for non-established traders, without being subject to the reciprocal treatment requirement generally established in the legislation.

Council Implementing Regulation (EU) No 282/2011 has modified this special regime by introducing certain special VAT management rules in the case of exclusion from the regime, rectification of VAT returns, impossibility of rounding off the VAT payable, etc.

3.3.2 Rules applicable from January 1, 2015

As noted above, Council Directive 2008/8/EC, as fleshed out by Regulation (EU) No 967/2012, introduces specific changes that will apply to electronic services from January 1, 2015 onwards. Specifically, as from that date, services supplied electronically by an EU-established trader to persons who are not traders and are established in a Member State or have their permanent address or usually reside there will be deemed to be supplied in the place where the non-taxable person is established, or where he has his permanent address or usually resides.

The Directive 2017/2455 established, with effects from 1 January 2019, a threshold (10.000€) up to which those supplies rendered to final consumers remain subject to VAT in the Member State of establishment of the provider.

In order to implement the above provisions, Implementing Regulation 1042/2013 has introduced the relevant amendments. Accordingly, the Regulation contains provisions:

  • To define and update the list of services that are affected by the rules discussed here and to clarify who the supplier is where several traders are involved (e.g. sale of applications).
  • To define the place of establishment of the customer (legal person not acting as a trader).
  • To clarify – since certain rules already exist in this respect in the Regulation – how to evidence the trader’s status as a recipient.
  • To specify the place of actual consumption of the services through presumptions on the customer’s permanent address or residence and the evidence that can be required, if applicable, to rebut them.
  • To establish transitional provisions.

The Regulation also address the supply of services through a portal or telecommunications network such as a marketplace for applications, in order to clarify who will be deemed the supplier in these cases.

The Regulation contains a number of provisions aimed at defining the place of business, establishment, permanent address or habitual residence according to the type of customer in order to clarify the application of the place-of-supply rules for supplies of services that depend on these circumstances.

These definitions are kept intact, although a specific rule is added for legal persons who do not act as traders whose place of establishment will be where the functions of their central administration are carried out (place of business) or where they have a permanent establishment that is suitable for receiving or using the services.

As regards determining the location of the recipient, the place-of-supply rules that apply from 2015 are those for supplies to parties acting as final consumers, that is, natural or legal persons not acting as traders.

For these purposes, the supplier may regard the recipient as the final consumer as long as the recipient has not communicated his individual VAT identification number to the supplier but, unlike other supplies of services, the supplier may consider the recipient as the final consumer regardless of whether he has information to the contrary.

In the case of legal persons that have several establishments or of natural persons who have a permanent address other than their habitual residence, the Regulation establishes that:

  • For non-trader legal persons, the “place of business” prevails on the terms defined in the preceding section.
  • For natural persons, priority will be given to their habitual residence (a concept which is already defined in the Regulation in its current wording) unless there is evidence that the service is used at the person’s permanent address.

However, these rules are not sufficient to determine the place of supply of services where the same recipient can access them from several places or by various means. To try to cover the most frequent cases, the Regulation includes specific rules such as the following:

  • If the services are supplied requiring the physical presence of the customer (e.g. an internet café, a wi-fi hot spot or a telephone booth), the services will be taxed at that location. This rule also applies to services supplied by hospitality establishments where they are supplied in connection with accommodation services.
  • If the service is supplied on board a ship, aircraft or train, at the place of departure of the transport operation.
  • A service supplied through a fixed land line, at the permanent address of the customer where it is installed.
  • If it is supplied through mobile networks, at the country identified by the mobile country code of the SIM card.
  • If the service requires a viewing card or decoder or similar device (without being supplied through a fixed land line), where the decoder or similar device is located, or if that place is not known, at the place to which the viewing card is sent.

In any other case, at the place identified as such by the supplier on the basis of two items of evidence: billing address, IP address, bank details (e.g. place of demand deposit account), the mobile country code stored on the SIM card, location of the land line, other commercially relevant information.

With effects from 1 January 2019, it will be required only two items of evidence, if the amount of these services rendered by the supplier does not exceed 100.000€.

The presumptions on the place of supply of the service described can be rebutted by the supplier if three of the items of evidence listed in the preceding point determine a different place of supply.

The tax authorities may, in turn, rebut any of the presumptions described where there are indications of misuse or abuse by the supplier.

Lastly, note should be taken of what has been called the “mini one-stop shop” system, similar to the one existing for supplies of services by non-EU traders so as to permit the taxable person to file in the Member State of identification a single return which includes transactions addressed to final consumers of different Member States. In Spain, the form for registering with the system is already available.

3.3.3 Determination of the VAT rates applicable to the various types of e-commerce

In keeping with the view held by the Spanish tax authorities, the standard VAT rate of 21% will apply in all cases, since it is a kind of service for which the VAT Law makes no special provision.

It should be noted that the Directorate-General of Taxes, in a ruling dated March 26, 2010, as well as in a ruling dated July 1, 2011, has clarified that as the Directive does not provide for the application of reduced rates for electronic services, the reduced VAT rate can only be charged for e-books when they are included on physical media. This confirms the stance taken by the Spanish authorities not to apply reduced rates to electronic services even where they involve goods which, when supplied physically, are subject to a reduced VAT rate.

In this regard, the Commission launched infringement proceedings against Member States, such as France, that established reduced rates for e-books. In fact, the European Commission set up an Expert Group on Taxation of the Digital Economy. Specifically, the Group was tasked with analyzing and finding solutions for the distortion of competition that arose from the difference in rates between electronic and physical books. It is worth noting in this connection that the Court of Justice of the EU, in its judgment of September 11, 2014 (Case C-219/13), concluded that national legislation that subjects books published in paper form to a reduced VAT rate and books published on other physical supports such as CDs, CD-ROMs or USB keys to the standard VAT rate, is not contrary to EU Law, provided that it respects the principle of fiscal neutrality inherent in the common system of value added tax.

3.3.4 Formal obligations and management of taxes

Both the EU and the Spanish tax authorities ascribe to the principle that this form of commerce should not be hindered by the imposition of formal obligations that reduce the speed with which transactions should be performed.

Of particular relevance in this regard are the rules already contained in Council Regulation (EEC) No 1798/2003 on administrative cooperation in the field of value added tax, which, among other matters, provides that individuals and legal entities involved in intra-Community transactions can access the databases kept by the tax authorities of each Member State. This possibility of identifying reliably the status under which the recipient is acting (trader, professional or final consumer) is absolutely decisive for the proper tax treatment of each transaction.

Royal Decree 1619/2012, approving the Regulations on Invoicing Obligations, establishes the legal regime applicable to electronic invoices, which are defined as invoices that have been issued and received in electronic format without the use of a certain technology being required. This Royal Decree supersedes its predecessor, Royal Decree 1496/2003, and stipulates that paper and electronic invoices are treated similarly. In addition, it permits invoices to be kept in an electronic format provided that the conservation method ensures the legibility of the invoices in the original format in which they were received, and the data and mechanisms that guarantee the authenticity of their origin and the integrity of their contents.

The requirements that must be met by electronic invoices are as follows:

  • The recipient must have given his consent.
  • The invoice must reflect the reality of the transactions documented in it and guarantee this certainty throughout its period of validity.
  • The authenticity, integrity and legibility of the invoice must be ensured.

These aspects must be guaranteed by any legally admissible proof and, in particular, through the “usual management controls over the business or professional activity of the taxable person” which must enable the creation of a reliable audit trail establishing the necessary connection between the invoice and the supply of goods or services documented in it.

The authenticity of the origin and integrity of the contents will, in all cases, be guaranteed by:

  • The use of an advanced electronic signature based either on a qualified certificate and created using a secure-signature-creation device, or on a qualified certificate;
  • An EDI that envisages the use of procedures that guarantee the authenticity of the origin and integrity of the data;
  • Other means that have been communicated prior to their use and validated by the authorities.

On the other hand, regarding to formal obligations, it must be noted that from 1 July 2017, taxable persons who have to file monthly VAT returns (generally, those whose turnover in the previous year exceeded €6,010,121.04; any taxable person registered in the monthly refund scheme, and any taxable person applying the VAT grouping regime) must also keep their business records on the website of the Spanish tax agency (AEAT) by electronically providing the information requested therein, together with some additional data of the invoices (but not the invoices themselves).

Under this system (generally known as “SII”), taxable persons will have to submit the information related to invoices issued within 4 calendar days from the date of issuance. If they are invoices issued by the recipient or by a third party, a longer time period of 8 calendar days is allowed. In both cases, subject to a limit ending on the 16th day of the month following that in which VAT on the transaction became chargeable.

Invoices received must also be reported within 4 calendar days, in this case from the date when they are recorded in the accounts. A limit is laid down, also ending on the 16th day of the month following the assessment period in which the transactions are included. A similar rule applies to import transactions.

Saturdays, Sundays and public holidays are excluded from the calculation of the time periods.

In 2017, according to a transitional period, the period for submitting the information has been extended to 8 calendar days.