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Spanish Finance Ministry to introduce digital tax for firms like Airbnb and Uber

The government says it will target online platforms that pay low taxes thanks to a system designed for brick-and-mortar companies

airbnb
Spanish Finance Minister María Jesús Montero. EFE

The Spanish Finance Ministry has revealed plans to introduce a new tax on collaborative economy businesses such as Uber and Airbnb. On Thursday, Finance Minister María Jesús Montero of the Socialist Party (PSOE) said that companies whose business model is based on digital platforms will be subject to new tax regulations.

These companies do not pay appropriate taxes because the current tax laws do not recognize this type of activity

Finance Minister María Jesús Montero

“We are going to look at appropriate tax treatment for this not-so-recent phenomena of the collaborative economy, particularly in the accommodation and transportation sector,” she said. Online retail sales as well as online food companies will also be targeted.

“There are businesses we all know that are dedicated to services and are generating billions in economic activity, yet do not pay appropriate taxes, because the current tax laws do not recognize this type of activity.”

Under the ministry’s plan, a 3% tax would be levied on online advertising services, brokering services and on the sale of data collected from the information that users provide. This tax would apply to businesses with a revenue stream of more than €3 million in Spain and €750 million internationally.

The levy could affect companies such as Uber, Airbnb, Amazon, Homeaway and Just Eat.

Multinational companies are known to use legal means to move profits from one country to low-tax jurisdictions such as Ireland, the Netherlands or Luxembourg. Facebook Spain for instance, recently declared €1 million in losses by exploiting this legal loophole.

The government wants to reduce VAT on feminine hygiene products from 10% to 4%

The sister companies that operate in Spain tend to be intermediaries that only manage marketing and promotion.

In response to the ministry’s plans, Airbnb issued a press release arguing it “complies with regulations and pays all corresponding taxes in the places where it operates. The office in Spain offers marketing services and pays all applicable taxes, including [value added tax] VAT.”

Tampon tax to be reduced

Finance Minister Montero also announced that the government would lower the VAT on feminine hygiene products such as sanitary pads and tampons. “These are not considered basic-need products,” and are currently subject to a 10% tax that the government wants to reduce to 4%, she said. VAT on veterinary products will also be lowered to 4%.

New law against tax fraud

The ministry also wants to step up the fight against tax fraud with reforms for “more fair and equal legislation that sheds light on complex corporations to untangle this complexity.”

Before presenting the plan in the Senate, the finance minister said in a television interview on Antena 3 that there is a project to get older cars off the road by helping people with fewer resources upgrade their vehicle. Montero mentioned an increase on the tax on diesel as part of the government’s overall tax reform plan.

“We have a lot ahead of us”

Finance Minister María Jesús Montero denied reports that the Socialist Party (PSOE) government of Prime Minister Pedro Sánchez will call a new election if its 2019 budget is not approved. Sánchez, who came to power in early June through a no-confidence vote against Mariano Rajoy of the Popular Party (PP), heads a minority government with just 84 lawmakers in the 350-seat house. Without the support of other parties, the PSOE will be unable to approve a new budget and will have to govern with the former budget designed by the PP.

“We have a lot ahead of us … with or without the budget we are going to try to promote political initiatives that have the support of Congress,” Spanish news agency EFE reported her as saying.

English version by Melissa Kitson.

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