Although the 900,000 euro fine is modest for Google, which has a market capitalisation of over $350 billion, the move reflects growing concerns across Europe about the volume of personal data that is held in foreign jurisdictions in so-called "cloud" storage services.
Under such services, data is stored remotely via the Internet instead of on-site, giving individuals little control over their personal information.
Last month, the Dutch Data Protection Authority also said Google was in breach of the national data privacy law for the same practices while France moved closer to fining the U.S. internet giant in September.
Investigations are taking place in at least three other European countries.
The probes were triggered after Google in March 2012 unilaterally imposed new terms of service on users of all its cloud services, which include the YouTube video streaming site, the GMail email service, and the ubiquitous Google search engine.
That decision triggered privacy investigations in six European countries, including Spain.
"Inspections have shown that Google compiles personal information through close to one hundred services and products it offers in Spain, without providing in many cases the adequate information about the data that is being gathered, why it is gathered and without obtaining the consent of the owners," said the Spanish Agency for Data Protection in a statement.
The agency said users were not sufficiently informed that Google filtered the content of their emails and files to display advertising and, when it did it, used a terminology that was imprecise, unclear and with generic expressions.
It also said the company was breaking the law by using data it gathered for purposes that are unspecified and keeping this information for an indefinite time, while sometimes hindering users in their right to erase, access or modify this data.
In November Google agreed to pay a $17 million fine to settle allegations that it secretly tracked Web users by placing special digital files on the Web browsers of their smartphones.
© Thomson Reuters 2013