Online horse racing forecasting services will be taxed as other n.c.o.p. services

The classification of economic activities in the Business Activities Tax (IAE) depends on the real nature of the service provided and the way the activity is organized. Recently, the Dirección General de Tributos (DGT) has specified the tax location of a specific digital business model: the offering of horse racing forecasts via the internet.

What the DGT has resolved

The inquiry analyzes which headings of the IAE Tariffs those providing horse racing forecasting services through digital platforms must register under. The resolution establishes that internet service activities must be taxed according to their true nature, considering both the provider's conditions and the mode of service delivery.

In this sense, the DGT clarifies that if the activity is carried out through an organization, it is considered a business activity and not a professional one. Since the horse racing forecasting activity does not have a specific and determined heading in the tax, the administration determines that it must be provisionally classified in the group of activities not classified in other parts (n.c.o.p.) that present the greatest similarity to the service provided.

What it means for you

This criterion has direct implications depending on the business model adopted:

• Organizations and companies: If the activity is developed through an organized structure, taxation must obligatorily be carried out as a business activity under the heading of other n.c.o.p. services.
• Individual professionals: If a professional carries out the activity in a strictly personal and direct manner, without an organizational structure, the nature of the activity could derive towards a professional activity.

The key lies in the distinction between individual professional management and the business exploitation of the digital platform.

What is advisable to do

Entities operating in the digital forecasting sector should verify their organizational structure to ensure that the chosen IAE heading is correct. An erroneous classification of the activity could lead to contingencies before the Administration. It is necessary to assess the nature of the provision and the mode of execution to determine whether the activity should be taxed as business or professional.