Tax treatments and IRPF

What the tax treatment does

Whether you charge VAT on an invoice depends on where you and your customer are, and on whether the customer is a VAT-registered business. The Tax treatment on each invoice records that decision. It sets the VAT rate on the lines, prefills the legal wording the invoice has to carry, and decides where the invoice shows up in your tax reports.

Invoice 14 suggests the usual treatment, but it can’t know every detail of your business (goods versus services, special regimes, exemptions). If in doubt, check with your gestor or accountant.

The four treatments

• •Domestic: you charge your normal VAT. Lines start at your default rate, and no extra note is printed. This is also the right choice for private individuals in other EU countries (no VAT number): most services to them are taxed where you are.
• •Intra-EU reverse charge: a business customer in another EU country with a valid VAT number. You charge 0 % and the customer accounts for the VAT in their own country. The invoice must show their VAT number and a reverse-charge note (Article 196 of the EU VAT Directive); these sales also go on Modelo 349 in Spain.
• •Export (outside the EU): you are in the EU and the customer is outside it (UK, US…). Services are generally taxed in the customer’s country, so you charge 0 % and the note cites Article 44 of the VAT Directive (Article 69 LIVA in Spanish).
• •Out of scope: for businesses outside the EU, such as a UK sole trader invoicing an overseas customer. You charge 0 % and the note says the sale is outside the scope of your VAT.

Choosing a treatment sets every line to the matching rate — 0 % for the three cross-border ones, your default rate for Domestic — and replaces the tax note with the standard wording, unless you have already edited the note yourself. You can still change any line’s rate afterwards.

How the treatment is picked automatically

When you pick a customer on a new invoice or quote, Invoice 14 uses the customer’s own default if you set one (Customers). Otherwise it decides from the two countries and the customer’s VAT number:

• •Same country as you: Domestic.
• •You are in the EU, the customer is in another EU country and has a VAT number: Intra-EU reverse charge.
• •You are in the EU, the customer is in another EU country without a VAT number: Domestic.
• •You are in the EU, the customer is outside it: Export (outside the EU).
• •You are outside the EU and the customer is in another country: Out of scope.

Changing the customer on a new invoice re-runs this, unless you have already picked a treatment by hand. A saved draft keeps the treatment it was saved with.

Reverse charge needs a VAT number

Not charging VAT is only allowed when the customer really is a VAT-registered business, so the editor warns you:

• •Reverse charge needs the customer’s VAT number (set it on the customer) — the invoice can’t be issued until you add the number to the customer, or choose another treatment.
• •The customer’s VAT number has not been VIES-validated yet — you can still issue, but it’s worth running Check with VIES on the customer first. A VIES confirmation is your proof if the tax agency ever asks.

A VAT number that doesn’t match the country’s format also stops the invoice from issuing.

When the treatment can’t be changed

• •You aren’t VAT-registered: if Registered for VAT is off under Settings → Tax (Tax settings), every invoice is domestic with no VAT, the selector is greyed out and the VAT column disappears from your PDFs.
• •Corrective invoices: they always keep the treatment of the invoice they correct (Corrective invoices and voiding).
• •Issued invoices: like everything else on them, the treatment is frozen once issued.

With VERI*FACTU on, there are a few extra limits: cross-border invoices must be 0 % on every line, Out of scope can’t be used, and a domestic line can’t be 0 %. See Set up VERI*FACTU.

The tax note

Tax note (printed on the invoice) is printed under the totals. Invoice 14 fills in the standard wording for the treatment in the customer’s invoice language — for example “Inversión del sujeto pasivo…” for a Spanish-language reverse-charge invoice. Edit it if your accountant prefers different wording, or save your own text as a default on the customer.

IRPF withholding (Spain)

In Spain, autónomos in professional activities who invoice a Spanish business or another autónomo usually have income tax (IRPF) withheld: the customer pays you the invoice minus the withholding and pays that part to Hacienda on your behalf. You then deduct it on your own returns. The usual rate is 15 %, or 7 % in your first years of activity — check yours with your gestor. Private individuals don’t withhold, and neither do customers abroad.

Invoice 14 handles it at three levels:

• •Your default: under Settings → Tax, tick Apply by default and set the Default IRPF % (Tax settings). It then switches on automatically for customers in Spain when you are in Spain.
• •Per customer: under the customer’s Invoice defaults, choose Apply (with its own rate if needed) or Do not apply — for example for a private client in Spain (Customers).
• •Per invoice: the IRPF withholding box and IRPF % on the invoice itself always win. Tick or untick it for one-off cases.

The withholding is worked out on the taxable base and subtracted after VAT: Total due = base + VAT − IRPF. The PDF shows both the invoice total and the total due, and the IRPF report lists what each customer withheld (Spanish tax reports).