In many occasions, starting to issue invoices in Spain might cause some headaches to companies, businessmen and self-employed professionals. What are these retentions? The so known “Retenciones” (with-holding tax in Spain). How much must be deposited and where? Are these retentions progressive? These and many other doubts are the ones we are facing with daily. Therefore, it is advisable to have a law firm and team of economists such as Welex to help you with your three-monthly tax returns and everything to do with issuing invoices for your company in Spain.
Nevertheless, let’s go through some basic concepts to have a better understanding of everything related to the retentions in invoices.
Let’s start from the beginning, the retention you will have seen in Spanish invoices, are sums of money that need to be deposited at the Spanish Tax Office by the person or company that has issued the invoice.
Now that we understood the concept of retention, let’s go to the next step: who must make those retentions? In principle, companies and businessmen and self-employed professionals that purchase or offer services.
Which are the main retentions to be found in Spanish invoices? You will probably have heard of two of them by their abbreviations: IVA or VAT (Impuesto sobre el valor Añadido) and IRPF (Income tax for natural persons).
There are indeed other types of retentions that companies or businessmen must face, such as retentions in the salaries of their employees, premises rented out for commercial activities.
However, the most common ones are the VAT and the IRPF. To continue clarifying the concept of retentions, we will show you a practical case.
Let’s say for example that you are a businessman who offers some kind of service and you get a client to hire your service. At the end of the project, month or whenever you agree with the client, you will issue an invoice for the services rendered.
In said invoice, apart from the monetary sum for the work done, you must also include 21% VAT and 15% IRPF.
To make it even more clear, let’s use an example with an easy sum, let’s say 100€, so you can understand quickly.
Fees for the work done/ service rendered: 100€
VAT (+21%):+ 21€
IRPF (-15%):- 15€
Total invoice: 106€
Regarding the retentions, it is not only important to issue the invoices correctly, with the correct sums, but also that at the end of each quarter each company or businessman has the obligation to file at the Spanish Tax Office (Hacienda) a three-monthly tax return. Once again, we recommend delegating this part of the procedure to professionals in this sector.
Do not hesitate to contact the expert English speaking Spanish accountants and tax advisors in Marbella at Welex, your law firm and team of accountants in Marbella, Malaga, Spain.