What is withholding on an invoice?
When a professional invoices a company or another self-employed person, the client doesn’t pay the full amount: it keeps a percentage and pays it to the tax office on the professional’s behalf, as an advance on their income tax. That percentage is the withholding, and it appears on the invoice as a deduction.
The 15% and 7% withholding is the one for professional activities (Income Tax Law, art. 101.5, and Income Tax Regulations, art. 95.1). If your activity is a business one, for example a shop, other rules apply: check the AEAT table of withholding rates.
Withholding rates for professionals
| Rate | When it applies |
|---|---|
| 15% | The general rate for professional activities, on the gross income of the invoice. |
| 7% | Start of activity: the tax period in which you start and the following two, if you did not carry out any professional activity in the year before you started. You must tell the client in writing. |
| 7% | Some specific activities: municipal tax collectors, insurance brokers who use external assistants, sales representatives of the State Lotteries and Betting, and certain artistic activities with low income, under the conditions of article 95.1. |
Source: Income Tax Regulations (Royal Decree 439/2007), art. 95.1.
What an invoice with withholding looks like
Withholding is calculated on the base of the invoice, not on the total with VAT. An example with 15% and general VAT of 21%:
Taxable base: €1,000.00
VAT (21%): + €210.00
Income tax withholding (15%): − €150.00
Total to collect: €1,060.00
Your client pays you €1,060 and pays the €150 to the tax office with its Form 111. In the Canary Islands the invoice carries IGIC instead of VAT, but the income tax withholding is the same.
Who withholds and who doesn’t
Companies and other entities (including homeowners’ associations) and self-employed people withhold when they pay you in the course of their activity (Income Tax Regulations, art. 76.1). A private individual doesn’t withhold: if you invoice a person for a personal service, the invoice carries no withholding.
What is withheld is not lost. It is a payment on account of your income tax that you deduct on your Form 130 and in your annual return. And if in the previous year at least 70% of the income from your activity carried withholding, you don’t have to file Form 130 that year (Income Tax Regulations, art. 109.2).
Frequently asked questions
What income tax withholding does a self-employed professional’s invoice carry?+
As a general rule, 15% of gross income (the base of the invoice, without VAT). Someone starting out can apply 7% in the year of start and the following two if they did not carry out any professional activity the previous year (Income Tax Regulations, art. 95.1).
How do I apply the 7% start-up rate?+
You must tell your client in writing, and they must keep that signed communication. It is valid for the tax period in which you start and the following two, as long as you did not carry out any professional activity in the year before starting.
Does an invoice to a private individual carry withholding?+
No. Companies and other entities and self-employed people withhold when they pay in the course of their activity (Income Tax Regulations, art. 76.1). A private individual who pays you for something personal doesn’t withhold, so the invoice carries no withholding.
Do I lose the money that is withheld?+
No. What is withheld from you is a payment on account of your income tax: your client pays it to the tax office with its Form 111 and you deduct it on your Form 130 and in your annual income tax return.
Do I have to file Form 130 if almost all my invoices carry withholding?+
If in the previous year at least 70% of the income from your professional activity carried withholding, you are not required to make the instalment payment that year (Income Tax Regulations, art. 109.2).
Official sources
- Law 35/2006 on Personal Income Tax, art. 101.5: withholding on professional activities (BOE, in Spanish)
- Royal Decree 439/2007, Personal Income Tax Regulations, arts. 95 and 108: withholding rates and payment of withholdings (BOE, in Spanish)
- AEAT, economic activities leaflet: table of withholding rates (in Spanish)
Invoice with the right withholding
TributAI calculates the withholding on each invoice and takes it into account when preparing your Form 130, which you then file yourself at the e-office with your certificate.
See plans and pricing →This guide is for guidance only and is not binding tax advice. Tax rules can change; always check the AEAT e-office or a qualified tax adviser for your specific situation. This is an informative translation: the Spanish version prevails.