Spanish tax law imposes various obligations, but one of the best known is income tax withholding. It plays an essential role in invoicing and accounting, so questions about which invoices include income tax and when it applies are as common as they are important. In this guide, we look at examples of which invoices include withholding, what types of withholding there are, how to know if you have to include it, and the differences between VAT and income tax. What's more, we look at specific cases specific cases: invoices for training, professional services, intra-Community invoices, rental invoices, etc. We even explain how software automates these tax calculations.
What is income tax on invoices and why is it applied?
To begin with, IRPF (personal income tax) is a tax levied on the income earned by individuals residing in Spain. In terms of billing, IRPF withholding is not an additional tax per se. It is an advance payment that the professional or self-employed person will pay in their income tax return.
The mechanism, which is very simple, works as follows:
- The professional issues an invoice with income tax.
- The customer (company or self-employed individual) applies the withholding and pays a lower amount to the supplier.
- Subsequently, the client pays this withholding tax to the tax authorities on behalf of the professional.
Let's look at a simple example. A consultant issues an invoice for €1,000 in fees plus VAT (21%). They must apply a 15% income tax withholding. Therefore:
- Taxable base: €1,000
- VAT (21%): +€210
- Income tax (15%): -€150
- Total invoice amount due: €1,060
At easyap, we also answer any questions and frequently asked questions about invoices with VAT and income tax.
Who is required to withhold income tax on invoices?
However, you should be aware that not all invoices are subject to withholding tax. The regulation on who can issue invoices in Spain specifies who must apply income tax and when.
They are required to include income tax on their invoices:
- Self-employed professionals (lawyers, consultants, architects, etc.).
- Leases of commercial premises when the lessor is a natural person.
- Agricultural, livestock, or forestry activities, which have their own withholding tax.
They do not include income tax on their invoices:
- Product sales (retail or wholesale).
- Services provided by commercial companies (LLC, Inc.).
- Transactions with private customers (only subject to VAT).
- Activities that are exempt from VAT and do not involve withholding (e.g., formal education).
Therefore, we could summarize that income tax is included in the following cases:
- If the issuer is a self-employed professional (not a company).
- If the recipient is a company or self-employed individual (not an individual).
- If the activity is included in the professional categories of the IAE (Economic Activities Tax).
- In rentals of business premises between individuals and companies.
- In agricultural, livestock, or forestry activities , income tax applies, but it is reduced (2%).
Types of income tax withholding on invoices
Building on the last point in the previous section, the income tax withholding percentage in Spain depends on each activity:
| Type of activity | Standard retention | Reduced or special withholding |
| Self-employed professionals | 15% | 7% for new self-employed workers (first 3 years) |
| Agricultural and livestock activities | 2% | — |
| Forestry activities | 2% | — |
| Leasing of urban real estate | 19% | May vary according to annual regulations |
In any case, we summarize all this information on when to include income tax on invoices and when not to in this table:
| Scenario | Is income tax applicable? | Comments |
| Self-employed person who invoices a company | Yes | Withholding tax 15% (7% if you are newly self-employed) |
| Freelancer who invoices individuals | No | Only VAT applies |
| Computer sales by store | No | Purchase and sale transaction, non-professional |
| Rental of premises by an individual to a company | Yes | Withholding 19% |
| Training provided by a freelancer | Yes | Except for educational exemptions |
| Consulting for foreign companies (European) | No | There is no income tax, only intra-Community VAT. |
Difference between VAT and income tax on invoices
On the other hand, we know from our own experience that when starting out in finance and accounting, a common challenge is distinguishing between VAT and income tax on invoices.
- VAT: applies to almost all transactions. The issuer collects it and then pays it to the tax authorities.
- Personal income tax: applies only in specific cases (professionals and rentals). The customer withholds part of the invoice and pays it to the tax authorities on behalf of the supplier.
Therefore, the VAT increases the total amount of the invoice, while income tax reduces the amount to be collected. In other words, the former is added to the base and the latter is subtracted.
Specific examples of invoices with and without income tax
Once again, we see three specific examples of which invoices include income tax and which do not, and how they change the final amount.
1. Professional consulting invoice (with income tax)
- Taxable base: €1,500
- VAT (21%): +€315
- Income tax (15%): -€225
- Total amount due: €1,590
2. Sales invoice for office supplies (without income tax)
- Taxable base: €1,500
- VAT (21%): +€315
- Total amount due: €1,815
3. Commercial property rental invoice
- Taxable base: €2,000
- VAT (21%): +€420
- Income tax (19%): -€380
- Total amount due: €2,040
How easyap simplifies income tax management on invoices
The fact is that mismanaging income tax on invoices has significant drawbacks or disadvantages. Without going any further:
- Tax penalties for errors in the calculation of withholdings.
- Liquidity problems: due to confusion between net and gross income.
- Administrative overload when managing different types of invoices.
- Loss of control in companies with multiple suppliers and operations.
Therefore, applying income tax withholdings in corporate environments with high volumes of invoices, multiple suppliers, and changing lawsis very complex.
At this point, an electronic invoicing solution such as easyap provides added value, as it offers advantages such as:
- Automation of invoicing. The system automatically identifies whether an invoice should include income tax withholding or not and applies the correct percentage.
- Integration with ERP and other accounting systems (SAP, Oracle, etc.).
- Guaranteed legal compliance. The software complies with the certification required by both Spanish and European regulations.
- Scalability. It is an ideal and suitable tool for both medium-sized companies and large corporations with international operations.
- Specialized technical support. The team of experts offers personalized support both during the implementation phase of the solution and in the resolution of incidents.
Compared to other more basic solutions, easyap stands out for its efficiency, legal compliance, and specialized support for large billing volumes.
In short, knowing which invoices are subject to income tax is vital to avoid accounting errors and penalties. This is especially true if you manage thousands of invoices per month, with different suppliers, customers, and regulations. In that case, don't hesitate: you need a solution like easyap that provides automation, integration, and legal compliance for every transaction. Contact us with no obligation and we will tell you much more.
Frequently asked questions about income tax on invoices
Are training invoices subject to income tax?
It depends. If the trainer is a self-employed professional, yes. However, if the training is exempt from VAT under education regulations and is not considered a professional activity subject to withholding tax, it is not subject to income tax.
Are intra-Community invoices subject to income tax?
They are not subject to income tax, as this tax only applies to tax residents in Spain. What does apply is intra-Community VAT with reverse charge, as applicable.
