If you are a self-employed professional who obtains income from carrying out your activity in Spanish territory, you should bear in mind that your sales invoices must include withholding Tax or IRPF. We are talking about what the Spanish Tax Agency calls « Income derived from economic activities ».
Requirements for sales invoices
A withholding Tax or IRPF of 7 % or 15 % will appear on your sales invoices when the following conditions or requirements are met:
- If you carry out a professional, artistic or sporting activity. Specifically, depending on the type of activity you carry out, your Tax Advisor will process your registration with the Tax Agency on a declaration form called 036 or 037 in which your activity will be defined. It is at that moment when you will indicate to the Tax Office whether you are categorised or considered as a professional activity and, consequently, subject to a withholding Tax or IRPF on your sales invoices.
- As a professional you invoice your customers who are either Spanish companies or self-employed.
If you meet these two requirements, every time you issue a sales invoice you have to apply a withholding Tax of 7 % or 15 %.
As a premise, the general rate of withholding Tax or IRPF is 15 %. However, new self-employed persons can apply a reduced withholding tax of 7% in the first year of registration and in the following two years of activity.
How is this withholding Tax of 7% or 15% on sales invoices?
The IRPF amount is a negative amount on your sales invoice. Your customer does not pay you this amount. You do not collect this money from your customer, because he is obliged to keep it and, on a quarterly basis, pay it in your name to the Tax Office as an advance payment of your Anual Income Tax.
In other words, in the period from April to June, when you pays your Annual personal Income Tax, you will have an amount to pay, which, after deducting the money that your client has paid in advance, you will have to make a smaller payment to the Tax Office for your professional activity.
« You now stop collecting this amount from your client because it is an advance payment they make for you to the Inland Revenue, on account of your future Anual Income Tax ».
Let’s take a simple example:
If you perform a service for your client who is a company or self-employed for an amount of 1000 € your invoice would be as follows:
|Taxable Base:||+1.000,00 €
|+ VAT (21 %):||+210,00 €|
|-Withholding Tax (15 %):||– 150,00 €|
|Total invoice and amount receivable:||+1.060,00 €|
When your Tax Office carries out your annual IRPF in the Mod 100 (Personal Income Tax) it will indicate that the amount to be paid is reduced by the 150,00 € of withholdings on account that your client has already paid for you.
If you want to know more about your accounting as a professional or self-employed person, consult the lawyers and tax experts at Imont Legal & Taxes. Our experience, good work and personalised treatment of our clients are our guarantee.