Tax Advisory Spain: The DGT gives its opinion on the application of VAT in an electronic service

Tax advice on electronic publications is subject to 4% VAT

On July 22nd, the General Directorate of Taxes (DGT) resolved the Binding Consultation (V2509/2020) on the tax rate applicable to electronic services. In this case, the following background must be taken into account:

  • The starting point is Council Directive (EU) 2018/1713 of November 6th 2018 amending Council Directive 2006/112/EC as regards the VAT rates applied to books, newspapers and magazines.
  • This Directive has been transposed into domestic legislation by the second final provision of Royal Decree Law 15/2020 of April 21st, which amends Article 91.Two.1.2 of Law 37/1992.
  • According to the concept of a book given by Law 10/2007, the Spanish Royal Academy and Council Directive 2006/112/EC, the physical medium on which the book appears is irrelevant for it to be considered as such, as long as it is a scientific, literary or other work of sufficient length to form a volume.
  • Law 10/2007 also includes electronic books within this concept.

From the point of view of tax advice, the application of Value Added Tax (VAT) on electronic services must follow the following parameters:

  • When the main operation carried out by the companies associated to the entity was the supply of electronic books, the reduced rate of 4% will be applied.
  • When the main operation consists of the provision of education via the Internet, 21% would be applied.
  • If an e-book is supplied by the same recipient, the rate of 21% would also apply to the supply of the e-book, since it is an ancillary service to the main supply.
  • The supply of e-books by means of web downloads is a service provided by electronic means which must be taxed at the rate of 4% in accordance with RDL 15/2020.

It should also be noted that the reduced rate of 4% would also apply if the supply of such e-books were accompanied by online access by purchasers of such publications to certain tools on the learning platform.

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Etiquetas: tax advisor Madrid, Value Added Tax, tax consultancy Spain, Directorare General for Taxation, e-services