Tax liabilities in Spain for foreign online traders
Probably the most important Spanish legislative decree, General Law on the Protection of Consumers and Users (abbreviated as TRLGDCU), which concerns the rights of consumers in online trading, is based on European Directive 2006/112/CE of the European Council. This policy has an impact on the tax obligations of an online merchant.
The mentioned European Directive essentially states that once a foreign company exceeds a turnover of EUR 35,000 through sales to consumers in Spain, the VAT of the destination country of the goods (Spain) is raised. This leads to a number of reporting and tax obligations in Spain, whose non-compliance is constituted as a tax offense.
Tax obligations in Spanish online trading
- Application for a Spanish tax number for the foreign company
- Quarterly filing of the VAT return
- Submitting the annual VAT return
- Payment of quarterly VAT amounts, for example via an escrow account in Spain
EU VAT scheme for the distribution of digital products
Note also the EU VAT system for the distribution of digital products and services (for example, e-books, movies, music, and Internet services).
The taxation of digital products is due from the 01.01.2015 in the country of the final consumer. This applies to all deliveries of this kind to Spain with a value added tax of 21%. For these products, exceeding a minimum turnover (for example EUR 35,000) is not a requirement.
Prices on the website of foreign online retailers
In addition, particular attention should be paid to the price information of foreign online traders so as not to violate Art. 97 of TRLGDCU.
All prices must be clear and unambiguous, and must already contain the payable customer tax. It is advisable to inform the customer that the VAT is already included. This can be stated for example within the general terms and conditions of the business, or specified for each price quotation (“VAT included” or “with VAT”).
VAT – special features in the Canary Islands
The Spanish VAT does not apply in the Canary Islands and is replaced by the General Indirect Canary Island Tax (IGIC), a significantly lower tax. This involves an end consumer indirect tax, which is equivalent to the value added tax.
The display of prices that do not yet contain the tax is only permissible if the online business is aimed exclusively at non-Spanish consumers (B2B). It is important that this limitation is given to companies in the general conditions or that the prices without VAT only appear when the trade register number, tax identification number (CIF) or intra-community VAT number is specified.
If a website provides both prices, the price should be highlighted as to indicate that the tax is already included, for example, by a larger font. The obligation to indicate the prices with tax, refers to all prices on goods and on services, as well as to the delivery charges and any other additional costs.
Where online trading is directed to both consumers and entrepreneurs, it is advisable to make two different versions of the website in order to avoid ambiguity and confusion.
Leonard Dorny & Karl H. Lincke
Member of Eurojuris España, international network of law firms