IRPF Withholding (Retention): Who Qualifies and What You Get
Learn how income tax withholdings work for freelancers in Spain to help manage your annual tax obligations.
This scheme involves a portion of your income being set aside as a pre-payment of your annual income tax.
Who it's for
This applies to freelancers who are invoicing other businesses (B2B) within Spain.
What you get
By having tax withheld from your invoices, you are essentially making small pre-payments toward your income tax. This helps you avoid receiving a single, very large tax bill when you complete your annual declaration.
What it costs you
When you send an invoice, you must deduct a specific percentage from the total amount. This is usually a standard deduction of either 7% or 15%, depending on your specific situation.
The catch to know
Many new freelancers get confused when working with clients outside of Spain. If you are invoicing international clients, you do not apply this IRPF withholding to those invoices.
How to apply
- Determine if your client is a business based in Spain.
- Calculate the correct percentage to deduct from your invoice total.
- Include the deduction clearly on your invoice.
- Ensure these amounts are correctly reported in your tax filings.