VAT and services provided by a social network to its users

The DGT declares that there is no taxable event of VAT in the provision of services that are provided to users of a social network in exchange for their personal data.

A contributor user of a social network owned by a business entity, receives instant messaging services, photo album and bulletin board, among others. Although the services are provided without compensation, registering for the service implies transferring certain data to the owner company that will be profitable in different ways.

When in doubt as to whether the taxpayer has the status of an entrepreneur or professional and, if the services provided to the taxpayer are subject to the tax or not, the DGT is consulted.

The General Directorate, based on the conclusions reached by the  VAT Committee in its working document no. 958 of 10-30-2018 , considers that the users of these networks, by transferring their data, do not intend to participate in the production or distribution of goods or the provision of services. His only wish is to be able to use a series of services by paying the price, which in these cases, is the transfer of the right to use his personal data that belongs to the private sphere of the individual.

Therefore, the transfer of data does not constitute an economic activity nor is it a taxed provision of services, which entails that it breaks one of the elements necessary to consider that there is a taxable event in the tax: that the service is provided by an entrepreneur or professional acting as such.

It must be understood that a provision of services is only taxable if there is a direct relationship between the service provided and the consideration received, from which it follows that this is only carried out for consideration and, therefore, it is only taxable if there is between who The provision and its recipient carry out a legal relationship in which reciprocal benefits are exchanged and the remuneration received by the person providing the provision constitutes the effective value of the service provided to the recipient ( CJEU 3-3-94, Tolsma case C-16/93 ) .

In the exchange of electronic services in exchange for the transfer of data, services are provided to users regardless of the amount of data they provide or its quality. There are no different levels of service depending on the data provided, nor is there an obligation to provide a certain amount in a period of time, to remain connected to the service.

Therefore, there would be no direct relationship between the provision of electronic services without monetary consideration and the consideration received in the form of personal data. What it entails, that it cannot be classified as an operation carried out through consideration.