What IRPF retention on an invoice is and why it matters
IRPF retention on an invoice is the percentage your client deducts from the amount and pays directly to the Spanish Tax Agency (AEAT) on your behalf. It is not an extra cost for you: it is an advance payment of what you will later settle in your annual tax return. The standard rate is 15%, but there is a reduced rate of 7% for those who have just registered as self-employed (autónomo) professionals. Knowing when each one applies is essential to avoid invoicing errors and problems with the AEAT.
Who must include retention on their invoices
Not all invoices carry retention. It is only applied by self-employed people who carry out a professional activity (IAE headings in section two) when invoicing companies or other professionals. If you are a plumber, builder, or another business owner under the módulos regime or under direct estimation with a business activity (section one of the IAE), you generally do not apply retention.
Invoices issued to private individuals, export invoices, and intra-Community transactions do not carry retention either.
The most common cases of self-employed people who do apply retention are:
- Designers, programmers, and consultants.
- Lawyers, economists, and advisers.
- Architects, engineers, and technicians.
- Translators, journalists, and photographers.
- Trainers and coaches who invoice companies.
The standard rate: 15%
The 15% is the standard retention rate for professional activities. You apply it on your invoices to companies and professionals once you have completed the first two full years of activity since your initial registration with Hacienda.
This percentage is always calculated on the taxable base, that is, before adding VAT (IVA).
The reduced rate: 7%
The 7% applies when you start your professional activity. Specifically, you may use it in the year you register and the two following calendar years, provided you have not carried out that same activity in the previous four years.
To be able to apply it, you must expressly communicate this to your client on the invoice itself, stating that the requirements for doing so are met. It is not enough to simply show the percentage: you must make it clear that you are entitled to that reduced rate.
An important detail: the count starts in the year of registration, not the month. If you registered in October 2024, the year 2024 counts as the first year, 2025 as the second, and 2026 as the third. From 1 January 2027 you must switch to 15%.
Quick summary: when each rate applies
| Situation | Retention rate |
|---|---|
| Self-employed professional with more than two years of activity | 15% |
| Year of registration and the two following calendar years (no prior activity in the previous 4 years) | 7% |
| Invoice to a private individual | No retention |
| Invoice to a company in another EU country (intra-Community transaction) | No retention |
| Business activity (section one of the IAE) | Generally no retention |
A practical example with figures
Imagine you are a graphic designer who registered in March 2023. It is now 2025, so you are still in the third year since your registration: you can apply the 7% rate.
You issue an invoice to an advertising agency for a corporate identity project:
- Taxable base: 2.000 €
- VAT (IVA) 21%: + 420 €
- IRPF retention 7%: − 140 €
- Total to be paid: 2.280 €
The agency pays you 2.280 € and pays the 140 € to Hacienda on your behalf via Form 111. When you file your annual tax return, those 140 € will already appear as payments on account and will reduce what you owe (or increase your refund).
If you had already moved to 15%, the retention would be 300 € and you would receive 2.120 €. The work is worth the same, but Hacienda receives more in advance.
Common mistakes you should avoid
- Applying the 7% when you are no longer entitled to it. If you have completed more than two full years of activity and are still using the reduced rate, your client may claim the difference from you and you will have a problem with Hacienda.
- Not stating on the invoice that you are applying the 7% due to starting out. Without that express mention, the client may refuse to accept that rate or encounter problems in their own accounting.
- Including retention on invoices to private individuals. Private individuals do not declare retentions; if you include one, the client does not know what to do with it and you produce an incorrect invoice.
- Calculating the retention on the total including VAT. Retention is always applied to the taxable base, never to the amount including VAT.
- Confusing business activity with professional activity. If you are unsure which IAE heading you are registered under, check with your accountant.
What happens if your client does not apply retention to you
Some clients forget to apply retention or are simply not required to do so (for example, another self-employed person without employees or hired staff in certain circumstances). In that case, the problem is not yours: you issue the invoice correctly with the retention shown. If the client does not pay it to Hacienda, the responsibility is theirs.
What you must watch out for is that, when filing your annual tax return, you only include as retentions those that have actually been applied to you and appear in Form 190 submitted by your client. If you include retentions that have not been paid over, the AEAT will detect this and a penalty may follow.
Retention on corrective invoices
If you issue a corrective invoice to amend or cancel an original invoice that carried retention, the corrective invoice must also reflect the corresponding retention, at the same rate as the original. This ensures the amounts tally and no discrepancies arise in your client’s Form 111.
How Kullqi helps you avoid mistakes
In Kullqi you can set the retention rate that applies to you and the programme applies it automatically to every invoice you issue. When you switch from 7% to 15%, you simply update that figure and all new invoices are produced with the correct rate. In addition, as each invoice is chained and submitted to the AEAT via Veri*Factu without you having to do anything, you have the peace of mind that the record is correct from the very first moment.
Frequently asked questions
Can I apply the 7% if I was self-employed years ago and register again?
You can only use the 7% if you have not carried out that same professional activity in the four years prior to the new registration. If you have been inactive for more than four years, you may apply it again. If it has been less than four years, you must use 15% from day one. If in doubt, check with your accountant or the AEAT directly.
Are IRPF retention and VAT calculated in the same way?
No. VAT is added to the taxable base and collected by the person issuing the invoice to be paid over to Hacienda. IRPF retention is deducted from the total and paid to Hacienda by the recipient of the invoice. They are opposite mechanisms: one adds to and the other subtracts from the amount you receive.
What do I do if a client asks me for an invoice without retention but I am a professional?
If you are required to include retention because your client is a company or professional and your activity is professional, you must include it even if the client does not want you to. Issuing an invoice without retention when it is required is an error that can cause you problems. If the client insists, explain that the retention costs them nothing extra: they simply pay that portion to Hacienda on your behalf.
Where can I check whether my activity falls under section one or section two of the IAE?
You can check on the AEAT’s electronic office or review the heading shown on your registration in the business census (Form 036 or 037). If you are not sure, your accountant can confirm it for you in no time.
If you want to stop worrying about calculations and keep your invoices always in order, try Kullqi free for 14 days with no card required at app.kullqi.com.