Spain - DAC 7 implemented and other changes made to tax law

Spain enacted a new law on 24 May 2023 that transposes the EU DAC 7 rules into domestic law and makes other noteworthy changes to the General Tax Law (GTL), Corporate Tax Law and VAT Law. This article looks at the most important measures.

DAC 7

DAC 7 introduces new reporting and due diligence requirements on digital platform operators by expanding the scope of the automatic exchange of information in the EU to apply to such operators (for prior coverage, see the article in the July 2021 issue of Corporate Tax News). The DAC 7 rules, which apply retroactively as from 1 January 2023, require digital platforms to collect specific information from users offering goods or services on the platform and report that information to the tax authorities. The purpose of the measures is to ensure that persons deriving income from the sale of goods or services on digital platforms pay their fair share of tax and that EU member states automatically exchange information on income generated by sellers or service providers on the platform, regardless of whether the platform is situated in the EU.

Entities that are considered “reporting platform operators” under DAC 7 are subject to the due diligence and reporting rules, as well as certain registration requirements in the case of non-EU digital platform operators. For example, platform operators must identify sellers, collect and verify information on platform sellers, with the information then reported to the tax authorities in the EU member state in which the platform operator is resident or registered. Penalties apply for failure to comply with the regime.

General Tax Law

Several changes are made to the GTL as part of the transposition of DAC 7 into Spanish law:

• As from 1 January 2024, Spain’s tax authorities will be able to carry out joint coordinated audits with other countries within the scope of mutual assistance. The rules of both countries will apply in joint audits although the power of Spain’s authorities will be limited by domestic rules.
• The rules governing limited tax audit procedures are revised to allow the Spanish tax authorities to review official accounting information to verify that it matches the information in the authorities’ possession (previously, the tax authorities were not permitted to review any official accounting information in limited tax audits). In addition, the Spanish tax authorities can request information from third parties, conduct site audits and review documentation at the taxpayer’s premises.
• A single system to correct a self-assessment is introduced to simplify the process for taxpayers, i.e., a taxpayer may amend or complete a previously submitted self-assessment, regardless of the results of the amended/completed changes, without having to wait for an administrative resolution. Previously, taxpayers wishing to amend a self-assessment had to follow different procedures depending on the outcome of a voluntary regularisation. For example, a “complementary self-assessment” had to be used where the regularisation meant a higher tax payment or a lower refund, but if the regularisation resulted in a lower amount of tax due or a higher refund, the taxpayer had to file a writ explaining the circumstances and requesting that the tax authorities rectify the assessment, which required their specific approval.
• As from 1 January 2023, financial institutions that are required to communicate information on the tax residence of individuals must inform those persons that their information will be shared with the Spanish tax authorities and exchanged with other EU member states or a third country.   The notification must give the individual sufficient time to exercise the right to protect their personal data, and before the information is compiled and submitted to the tax authorities.

Corporate tax law

The rules on the deduction of interest expense are revised. Since 2015, the deductibility of net financial expenses in Spain has been limited to 30% of the company’s operating profit ("tax EBITDA"), up to the de minimis threshold of EUR 1 million. As from 1 January 2024, tax EBITDA will not include income, expenses or revenue that has not been included in the corporate taxable base (e.g., where an expense is excluded from the taxable base under other provisions in the corporate tax law).

For practical purposes, the new rules do not change the application of the interest deduction limitation in Spain since income or expense that is considered nonchargeable or non-deductible already may not be taken into account when calculating the 30% limitation. In addition, in principle, income or expense from a permanent establishment outside Spain will not have to be taken into account for purposes of the tax EBITDA of the Spanish head office when such income/expense is considered exempt/non-deductible.

VAT and import regime

The following changes are made to the VAT rules:

• Financial services rendered in B2B transactions are now outside the scope of application of the use and enjoyment rule, but this rule continues to apply in B2C transactions (see article in this issue).
• The removal of goods from a VAT non-customs deposit is considered a transaction assimilated to an import, rather than an import of goods in order to facilitate the assessment of these transactions.
• The import regime for e-commerce is modified to allow entrepreneurs and professionals with activities in the Canary Islands, Ceuta or Melilla to be part of the regime without having a fiscal representative established in the EU.

Patricia Romero Gandara
BDO in Spain