Introduction

Many businesses prefer cloud computing services instead of owning and maintaining their own computer servers (and related software) in their own premises. Often, the customer (i.e. the entity availing the cloud computing services) and the service provider (i.e. the owner of the computer equipment) are tax residents of different jurisdictions. In such cases, could the payments by the customer to the service provider be regarded as ‘royalties’ in accordance with the definition of that term in the applicable tax treaty?

The Spanish National Court was required to answer the above question.