Advice about invoices in Spain for small businesses and autonomos
Invoicing should not be complicated and, as long as some essential requirements of the Spanish system are met, it should not be difficult in practice either.¬† Here are some practical pointers if you are self-employed (autonomo) or operating a small business in Spain:
1. Details to include
- invoice number (required - seesection 2)
- invoice date¬†(required)
- your name and NIE¬†(required)
- your address¬†(required)
- description of goods and services¬†(required)
- cost of goods and services supplied¬†(required)
- IVA rate and amount¬†(required)
- amount of retencion if applicable¬†(required)
- total invoice amount¬†(required)
- name of customer (required)
- address of customer (recommended/useful)
- your payment terms¬†(recommended/useful)
- your bank details for payment¬†(recommended/useful)
- your web address and phone number¬†(recommended/useful)
- NOTE: companies put company name, CIF and mercantile registry reference
2.¬† Invoice numbering and naming
An important Spanish rule to comply with concerns numbering of invoices. ¬†The business can choose whatever numbering convention they like but, once the first invoice has been issued, subsequent invoices must be numbered sequentially, upwards, without any gaps and in date order. ¬†So for example if you start with 0001001 you must follow this with 0001002, 0001003 etc ¬†You will find your accountant asks you to issue new invoices if there are gaps or if invoices are issued out of time e.g. today you issues 001003 and tomorrow 001002.
If for whatever reason an invoice is not paid (e.g. bad debt or it was issued in error), it must still be submitted in both your accounting and tax declarations but a claim can also be made for the bad debt or error, cancelling it out, either in the same or a future accounting period.
If you are a company or autonomo who trade under a different name, like the name of your website or a brand (e.g. Advoco) you can include this on the invoice but only alongside the correct fiscal entity (autonomo + NIE or company + CIF) so the customer and authorities can see both.
3. ¬†Spanish Value Added Tax (IVA)
Generally IVA must be applied to all invoices as there is no such thing as being "VAT registered" or not being VAT regsitered; everyone charges and pays IVA with some exceptions for certain categories of business. ¬†The standard rate of IVA is 18% in Spain but there are reduced rates of 8% and 4% as well as some things which are zero rated. ¬†See this article¬†http://www.advoco.es/hot-topics/63-iva-vat-rates-in-spain.html
Another exception is invoicing to clients out of Spain. ¬†Exports of goods outside of the EU are free of IVA for example. ¬†Also most services supplied to business clients outside of Spain are free of IVA (services supplied to private customers must be charged IVA as normal). ¬†If the business is within the EU then IVA is not charged but the customer receiving the invoice must apply their local rate of VAT, something called the "reverse charge method" which is described on the HMRC website and discussed in this article¬†http://www.advoco.es/home/22-latest/47-invoicing-to-and-from-spain-new-vat-rules.html
4. ¬†Retenciones of IRPF (Impuestos de Renta Persona Fisica - income tax)
Another feature which differentiates the Spanish system is the existence of retenciones, a form of withholding tax, which is applied to some autonomo invoices. ¬†These operate a bit like withholding tax on interest paid on a bank account i.e. you don't receive gross interest because a % is retained by the bank and paid over to the Tax Office as tax on your behalf. ¬†If you are an autonomo and invoicing a business as opposed to a private individual they are obliged, like the bank, to withhold a % of the invoice value to pay to the Agencia Tributaria on your behalf. ¬†The rate is normally 15% but there is a lower rate of 7% applied for the first three years of an autonomo's life. ¬†Certain classifications of autonomo (empresarial) do not have to include retenciones on their invoices but professional (profesional) autonomos must. ¬†There is more on this topic in this article: ¬†http://www.advoco.es/advice/26-autonomo-self-employed/73-autonomo-tax-burden.html
5. Cashflow considerations
The income from an invoice is accounted for and, more importantly, included in tax returns on the invoice date, not when it is paid. ¬†This can cause cashflow difficulties when a large invoice is issued and the tax on the income is paid before the account has been settled by the customer. ¬†There are two ways round this problem if it becomes serious:
- if you are aware of a large invoice that is about to be issued before the quarter end, simply delay issuing it until the first day of the subsequent quarter. ¬†You can explain to the client what you have done and keep the original settlement date.
- alternatively you can issue and account for the invoice as normal and ask the Agencia Tributaria for a one or two month extension on paying that quarter's taxes
6.¬† Invoicing when not registered as an autonomo or company
Anyone who has not registered their business, either by forming a company or declaring themselves autonomo, is not entitled to issue official invoices. ¬†They cannot charge IVA and would not be able to pay over the IVA to the Agencia Tributaria even if they could. ¬†There is an obvious incentive for people in business but without a legal status as such, to issue invoices. ¬†They can then deal with businesses who will always demand an invoice but without the expense of having to register and pay business taxes. ¬†For this reason there is some discussion on Spanish business websites about the possibility of issuing invoices without being autonomo e.g.¬†http://www.desarrolloweb.com/faq/377.php
One theory is that it may be possible to bill up to the amount of ‚ā¨3.000 with one client without being registered. ¬†The thinking is that the Agencia Tributaria will not check the validity of the entity doing the invoicing below this threshold. ¬†The figure comes from an annual requirement of all businesses that they report cumulative annual billings over 3.000‚ā¨ with a single counterparty. ¬†The Agencia Tributaria match off all such reports to check that all business reporting income of XX amount from a particular counterparty are matched by that counterparty declaring the exact same amount as expense. ¬†However this does not mean that all invoices adding up to less than 3.000‚ā¨ per counterparty are ignored and invisible to the Agencia. ¬†It would be very unadvisable to issue invoices to a business without first registering as an autonomo whatever the amount. ¬†When the business claims your "invoice" as an expense it is quite possible that Agencia Tributaria will decide to check the validity of the counterparty and whether they have declared the income. ¬†Back taxes, social security and fines will be the inevitable result.
For details of our business services click here¬†http://www.advoco.es/most-requested-services/56-services-for-spanish-autonomo-self-employed.html
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