In Spain, certain professional services are subject to withholding tax on personal income tax (IRPF withholding – Retención IRPF). This is an advance payment of income tax that is not paid directly by the professional, but instead withheld by the Spanish business client and paid to the Spanish Tax Agency.
When Does IRPF Withholding Apply?
IRPF withholding is only required when all of the following conditions are met:
- The service is provided by a self-employed professional (e.g. lawyers, tax advisors, architects or consultants).
- The client is a Spanish company or a Spanish self-employed person receiving the service as part of their business or professional activity.
- The service is invoiced for a professional fee.
Invoices issued to private individuals or foreign clients are generally not subject to IRPF withholding.
How Does the System Work?
The professional shows the IRPF withholding on the invoice (generally 15%, or 7% in certain cases).
The Spanish business client:
- pays only the reduced invoice amount,
- declares and pays the tax withheld to the Spanish Tax Agency (AEAT) on a quarterly basis using Modelo 111.
For the professional, the amount withheld constitutes an advance payment of personal income tax, which is credited against the final tax liability in the annual income tax return.
Example of an invoice with IRPF withholding:
Professional fee (Taxable base): €100.00
+ VAT (IVA) (21%): €21.00
– IRPF withholding (15%): –€15.00
Invoice amount (Total payable): €106.00
How Can You Determine Whether IRPF Withholding Must Be Included on an Invoice?
The relevant factor is the tax registration of the activity under the Impuesto sobre Actividades Económicas (IAE).
The IAE is the Spanish tax classification system for economic activities. If an activity is classified as a professional activity (actividad profesional), such as the activities of lawyers, architects or consultants, the corresponding professional fees are generally subject to IRPF withholding, provided that the client is a Spanish company or self-employed person.
Practical Note
IRPF withholding is not an additional tax, but merely an advance payment of income tax. It reduces the amount paid to the professional, but does not reduce the VAT (IVA) charged on the invoice.
Our firm will be pleased to assist you in analysing your specific situation, carrying out the necessary administrative procedures on your behalf and preparing and filing the corresponding tax returns. If you are interested in our services or have specific questions regarding this topic, please do not hesitate to contact us by email or telephone.
Author:
Lisa Wörfel
Tax Advisor
info@sspartners.es
Tel: (+34) 951 12 13 06
Facebook I LinkedIn I Amazon
Stay informed! Follow us on:
(+34) 
