Nowadays Setting up an ecommerce business is increasingly easy. Nevertheless the delocalization of business entities, goods and methods of payment can be an accounting and legal challenge.
Spain is a very good place for deploying an ecommerce business, as the VAT is one of the lowest in the EU. If you are operating an online activity you are required to charge Spanish VAT tax if you are selling from or to Spain according to different situations.
The Spanish law distinguishes two forms of e-commerce:
- Offline ecommerce
- Online ecommerce
The “agencia tributaria” (the Spanish tax authority) calls “Comercio Offline” (Offline ecommerce) the sale of physical products through electronic medias. The only difference with traditional commerce is that in this case Internet is used merely as a different distribution or sale channel. In practice there is no difference with a traditional sale as the same product could be sold in a shop, by catalog or by phone, therefore the taxation regime the VAT and all the taxation is exactly the same as with traditional commerce.
The Spanish tax authority calls “Comercio Online” the commercial transactions where the product is completely delivered through electronic media (cable, radio, optical systems), as long as data storage and data compression services.
“Comercio Online” is thus a blanket term that comprises services (for example web hosting, remote e-learning or remote consultancy) and products delivered electronically like movies, music, eBooks. In practice products delivered electronically will be considered services by the Spanish administration.
“Comercio Online” will include anything immaterial delivered electronically.:
- Web hosting
- Remote maintenance of software and hardware
- Software delivery and updating
- Distribution of images, text, information and its storage in databases
- Delivery of music, movies, games (including money betting and online gaming)
- Delivery of scientific, artistic, sport, cultural and political content
All this will be handled differently by the tax authorities under the “régimen especial de servicios electrónicos” (special measures for electronic services) Article 70.Uno.4º B) Ley 37/1992 and Article 9.2.e) and Annex L Sixth Directive 77/388/CEE.
It is important to remind that Canary Islands, Ceuta and Melilla have a special VAT regime and in this context should be considered “outside the EU” as they are outside the European Union Value Added Tax Area.
For online ecommerce there are several cases:
The supplier is in Spain and the recipient is a consumer in Spain or the EU
The normal VAT rules will be used. The supplier will add the VAT to the sale and he will later on pay the VAT to the Spanish Tax authorities.
The supplier is in Spain and the recipient is a business in mainland Spain (excluding Canary Islands, Ceuta and Melilla)
The normal VAT rules will be used. The supplier will add the VAT to the sale and he will later on pay the VAT to the Spanish Tax authorities. The recipient will be able to detract the VAT in his quarterly VAT declaration.
The supplier is in Spain and the recipient is a business in another EU state
In this case the supplier will not charge the Spanish VAT and the recipient won’t have to pay VAT. However the recipient will have to file a reverse VAT charge procedure. In practice this is an accounting procedure in which the recipient will pay and deduct the VAT at the same time.
The supplier is in Spain and the recipient is a business in the Canary Islands, Ceuta or Melilla
There won’t be and VAT charges in the transaction.
The supplier is in Spain and the recipient is a business or a consumer outside the EU
There won’t be and VAT charges in the transaction (unless the service is enjoyed on the Spanish territory)
The supplier is in the EU excluding Spain and the recipient is a consumer in Spain.
The consumer will pay the full “VAT included” price of the supplier country.
The supplier is in the EU excluding Spain and the recipient is a business in Spain (excluding Canary Islands, Ceuta and Melilla)
In this case the supplier will not charge his country VAT and the recipient won’t have to pay any VAT. However the recipient will have to file a reverse VAT charge procedure in his accounting.
The supplier is outside the EU and the recipient is a business in Spain
There won’t be any VAT to be paid but the recipient will have to file a reverse VAT charge procedure.
The supplier is outside the EU and the recipient is a consumer in Spain
If the business doesn’t have any branches in any EU country it will have to register in Spain or in another EU country according to articles 163 bis and 163 quater of the Law 37/92 (article 26 quarter of the Sixth directive). This registration procedure will be simplified but will require the business to choose a EU state. Once this registration is done the business will charge and deduct VAT exactly like a EU company or professional. This was necessary to adjust on the unfair advantage that businesses outside the EU were having by providing products in practice VAT free.
Whenever starting an online business in Spain it is always good to ask the opinion of a Spanish lawyer. Ecommerce tax issues can be potentially tricky since the transactions, are regulated mostly by EU laws and international treaties.