[Federal Register Volume 86, Number 12 (Thursday, January 21, 2021)]
[Notices]
[Pages 6407-6408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01171]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Notice of Determination Pursuant to Section 301: Spain's Digital 
Services Tax

AGENCY: Office of the United States Trade Representative (USTR).

ACTION: Notice.

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SUMMARY: The U.S. Trade Representative has determined that Spain's 
Digital Services Tax (DST) is unreasonable or discriminatory and 
burdens or restricts U.S. commerce and thus is actionable under Section 
301.

FOR FURTHER INFORMATION CONTACT: For questions concerning the 
investigation, please contact Thomas Au or Patrick Childress, Assistant 
General Counsels at (202) 395-0380 and (202) 395-9531, respectively, 
Robert Tanner, Director, Services and Investment at (202) 395-6125, or 
Michael Rogers, Director, Europe and the Middle East at (202) 395-2684.

SUPPLEMENTARY INFORMATION:

I. Spain's DST

    Based on information obtained during the investigation, USTR has 
prepared a comprehensive report on Spain's DST (Spain DST Report). The 
Spain DST Report, which is posted on the USTR website at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes, includes a full description of Spain's DST. 
To summarize, Spain introduced a legislative proposal to establish a 
DST on February 28, 2020 and adopted the DST on October 7, 2020. The 
DST applies a three percent tax on certain digital services revenues 
related to online advertising services, online intermediary services, 
and data transmission services. Companies with worldwide revenues of 
[euro]750 million or more and [euro]3 million in certain digital 
services revenues are subject to the tax. The tax is expected to take 
effect on January 15, 2021.

II. Proceedings in the Investigation

    On June 2, 2020, the U.S. Trade Representative initiated an 
investigation of Spain's DST pursuant to section 302(b)(1)(A) of the 
Trade Act of 1974, as amended (Trade Act). See 85 FR 34709 (June 5, 
2020) (notice of initiation). The notice of initiation solicited 
written comments on, inter alia, the following aspects of Spain's DST: 
discrimination against U.S. companies, retroactivity, and possibly 
unreasonable tax policy. With respect to tax policy, USTR solicited 
comments on, inter alia, whether the DST diverged from

[[Page 6408]]

principles reflected in the U.S. and international tax systems 
including extraterritoriality, taxing revenue not income, and a purpose 
of penalizing particular technology companies for their commercial 
success.
    Interested persons filed over 380 written submissions in response 
to the notice of initiation. The public submissions are available on 
www.regulations.gov in docket number USTR-2020-0022.
    Under Section 303 of the Trade Act, the U.S. Trade Representative 
requested consultations with the Government of Spain regarding the 
issues involved in the investigation. Consultations were held on 
December 17, 2020.
    As noted, based on information obtained during the investigation, 
USTR has prepared and published the Spain DST Report, which includes a 
comprehensive discussion on whether the acts, policies, and practices 
under investigation are actionable under Section 301(b) of the Trade 
Act. The Spain DST Report supports findings that Spain's DST is 
unreasonable or discriminatory and burdens or restricts U.S. commerce.

III. Determination on the Act, Policy, or Practice Under Investigation

    Based on the information obtained during the investigation, and 
taking account of public comments and the advice of the Section 301 
Committee and advisory committees, the U.S. Trade Representative has 
made the following determination under sections 301(b) and 304(a) of 
the Trade Act (19 U.S.C. 2411(b) and 2414(a)): the act, policy, or 
practice covered in the investigation, namely Spain's DST, is 
unreasonable or discriminatory and burdens or restricts U.S. commerce, 
and thus is actionable under section 301(b) of the Trade Act. In 
particular:
    1. Spain's DST, by its structure and operation, discriminates 
against U.S. digital companies, including due to the selection of 
covered services and the revenue thresholds.
    2. Spain's DST is unreasonable because it is inconsistent with 
principles of international taxation.
    3. Spain's DST burdens or restricts U.S. commerce.

IV. Further Proceedings

    Sections 301(b) and 304(a)(1)(B) of the Trade Act provide that if 
the U.S. Trade Representative determines that an act, policy, or 
practice of a foreign country is unreasonable or discriminatory and 
burdens or restricts United States commerce, the U.S. Trade 
Representative shall determine what action, if any, to take under 
Section 301(b). These matters will be addressed in subsequent 
proceedings under Section 301.

Joseph Barloon,
General Counsel, Office of the United States Trade Representative.
[FR Doc. 2021-01171 Filed 1-19-21; 8:45 am]
BILLING CODE 3290-F0-P