One of the most common questions when starting a self-employed activity in Spain is what IRPF (Personal Income Tax) withholding to apply on invoices. This percentage, which you pay in advance to the Tax Agency (Hacienda) towards your annual tax return, is crucial for your financial planning and for avoiding surprises.
As tax experts, we'll clearly explain which withholding rate applies to you.
The General Rate: 15% for Professionals
The general rule for most freelancers engaged in professional activities is to apply a 15% withholding on invoices issued to other businesses or professionals.
Who falls into this category?
* Consultants, designers, programmers, translators.
* Lawyers, architects, engineers.
* Trainers, journalists, and other liberal professionals.
It's important to remember that this withholding only applies when your client is a company or another freelancer. If you invoice an individual (private customer), the invoice does not include an IRPF withholding.
The Reduced Rate for New Freelancers: 7%
If you're just starting out, the law offers an advantage to improve your cash flow. New freelancers can choose to apply a reduced withholding rate of 7%.
Conditions to apply the 7% rate:
* During the year you start your professional activity and for the following two full calendar years.
* You must not have engaged in any professional activity in the 12 months prior to registering.
Although it's an attractive option, it is voluntary. Applying 7% means you'll have more cash on hand day-to-day, but it also means you've paid less tax in advance. If your profits are high, you will likely have to pay the difference in your annual tax return. If you're thinking of getting started, this is a key factor to consider. You can find more details in our guide on how to register as a freelancer step by step.
Does Annual Turnover Affect the Percentage?
The withholding percentage (15% or 7%) does not depend on your turnover volume, but rather on your status (new freelancer or not) and your type of activity. However, your turnover does influence the outcome of your annual tax return.
* With the 15% withholding: If your deductible expenses are high and your net income is low, you're likely to get a tax refund from Hacienda.
* With the 7% withholding: It's more likely that your tax return will result in a payment, as you have paid a smaller amount in advance.
The Importance of Correct Invoicing for VeriFactu
Applying the correct IRPF rate is another piece of the puzzle for flawless invoicing. With the imminent arrival of the new VeriFactu invoicing system, accuracy on every invoice will be more important than ever. Remember that the deadline for companies is January 1, 2027, and for freelancers, it is July 1, 2027.
Using compliant invoicing software will not only help you with withholdings but also ensure you meet all new legal requirements. Get ready for the changes by checking out our complete guide on VeriFactu 2027: Deadlines for Freelancers in Spain.