The Diplomat
The Spanish government, along with those of France, Italy, Austria and the United Kingdom, have agreed with the United States to eliminate the so-called “Google tax” by 2024, in exchange for Washington not applying the tariffs it had announced on imports of some products from these European countries.
The agreement reached yesterday means that Spain and the other four European countries will maintain their respective national digital taxes until the first pillar of the agreement on corporate taxation reached by the Organisation for Economic Cooperation and Development (OECD) at the request of the G-20 comes into force. This pillar will enter into force by 31 December 2023 at the latest and consists of multinationals taxing their profits in the territories where they are generated.
In exchange, Washington will withdraw all tariff measures imposed on these countries.
According to the Minister of Finance and Public Administration, María Jesús Montero, the agreement “demonstrates Spain’s willingness to reach international consensus on issues as important as improving international taxation to make it fairer, but it is also an example of the Government’s leadership in defending our country’s interests in the tax and trade sphere”.
“It is a very positive agreement that provides legal security and certainty to our productive fabric by guaranteeing that there will be no trade barriers to the entry of Spanish products into the US market, she added.
In June, the United States approved a 25% tariff on a series of Spanish products from the textile, footwear and glassware sectors, in retaliation for Spain’s digital services tax, which they considered discriminatory and detrimental to the country’s commercial interests.
The trade retaliation did not enter into force at the time because it was approved with a 180-day suspension of application. The purpose of this suspension was precisely to give the OECD time to reach a multilateral solution that would include all countries. The measure was scheduled to enter into force in December, but its implementation has been avoided under this agreement.
In addition, Washington’s deal with European nations also includes a transition period from 1 January 2022 until the first pillar of the OECD agreement enters into force or 31 December 2023, whichever comes first. During this transition period, the US has committed not to initiate any additional trade measures.
From 2024 onwards, it will be assessed whether the taxes paid by the affected US multinationals on domestic digital taxes are higher than they would have had to pay under pillar 1. If so, Spain and the other European countries will have to pay these companies a tax credit for the difference between the two amounts.
A second pillar will cover companies with a global turnover of 750 million euros or more and includes a minimum corporate tax rate of 15% in all jurisdictions that have signed up to the agreement. The Spanish government has gone ahead and included it unilaterally in the 2022 General State Budget.
