You have the possibility of applying a 7% withholding on your invoices to your clients as long as you have just started your activity as a freelancer, i.e. you have not carried out your professional activity for the whole of the last year.
The reduced personal income tax withholding is a benefit for new freelance workers in Spain in order to have greater liquidity during their start-up period, which is why it can only be applied by those who have not carried out any economic activity in the twelve months prior to registration.
⚠️ The law requires 15% income tax to be withheld on invoices to self-employed professionals. Therefore, you must formally inform all your new clients (download standard letter) that you meet the requirements to benefit from the reduction in withholding. You can also attach the document of your registration as autónomo to prove the date and justify that the 7% is applied to you.
In short, as a freelance, there are only two requirements for applying a reduced withholding tax at the start of your professional activity:
That you have not carried out any activity in the last 12 months
Communicate to your clients that you will apply the 7% withholding tax
Is it compulsory to apply the 7% personal income tax if I am just starting out?
It is not compulsory, but it is advisable if you are just starting out and do not know if you will make a lot of profit at the beginning. If you have any doubts, the best thing to do is to talk to our team of experts (firstname.lastname@example.org) so that they can advise you on whether it would be better to apply a different percentage of IRPF.
Think of it this way, if you have been paying higher amounts of tax on your invoices each quarter, you will pay less on your annual tax return (and vice versa). In the end you will pay it one way or another, sooner or later.
When can you NOT apply the reduced income tax withholding to your invoices?
If your case does not meet these requirements or if more than 2 years have passed since the year in which you started your activity, you will have to indicate the percentage of personal income tax withholding that corresponds to you according to your earnings, which is 15%.
If you have been withholding less than what you are entitled to, because the client has not been notified or because of an error in communications, the law establishes that you will only be able to deduct for "withholdings and payments on account" the correct amounts that have been withheld by those obliged to withhold, i.e. your client. Please note that regardless of the amount of withholdings you apply, everything will be regularized in your annual tax return, where your total income will be taken into account.
As a Xolo customer, if you have made the invoices from our platform, you do not have to worry that the withholdings on your invoices are incorrect, as the right withholding will be applied automatically.
If you have any doubts about this, we advise you to contact our team (email@example.com). We will be happy to help you!