How to Invoice?

In Spain it is important to issue invoices correctly and to make sure that received invoices are correctly issued by your providers.

Introduction

The Tax Agency will not accept invoices even if they have only minor formal defects with the result that these expenses cannot be deducted, you will pay higher taxes and, on top of it, you will be fined for tax evasion plus interest in case of inspection.


Ordinary invoices

The ordinary invoice is an official document that serves to record a commercial operation, whether it is the purchase or sale of a product or the provision of a service. It must therefore contain all the data relating to the transaction carried out so that it can be filed in the most orderly manner possible. It is therefore a way of keeping track of all transactions and services carried out by a professional or a company. Invoices must contain at least the following basic information:

  • The word Invoice or Factura on the document
  • Packing bills or pro forma invoices are not valid documents
  • Date of issue and transaction date, if different
  • A unique, sequential and correlated number
  • VAT number of the supplier and customer
  • Full address of the supplier and customer
  • Full description of the goods or services provided
  • Details of quantities of goods, if applicable
  • Unit prices, if applicable
  • Details of any discounts provided
  • The net, taxable value of the supply
  • The VAT rates and amounts applied broken out by rate
  • The retention rates and amounts witheld for income tax (IRPF)
  • The gross, total amount of the invoice
  • Where a foreign currency is used, the exchange rates must be identified

Simplified invoices or “Facturas simplificadas”

This is a type of invoice that is used to deduct a company’s expenses and only includes the issuer’s tax data. In other words, it is not necessary for the tax data of the recipient of the simplified invoice to appear on the invoice. And that is why it is “simplified”: because it is simpler. It is also often referred to as a ticket although this is not the correct name, and is often used by restaurants, taxis, hairdressers etc. A simplified invoice must include the following elements:

  • A unique, sequential and correlated number
  • Date of issue.
  • Name or corporate name and tax identification number of the issuer.
  • Simple description of the product delivered or the service provided.
  • Tax rate applied. If different VAT rates are applied, include the taxable bases separately.
  • Total amount to be paid.

The most important difference between an ordinary invoice and a simplified invoice is that a simplified invoice does not allow the recipient to deduct the associated VAT. Also it is increasingly required for ordinary and simplified invoices alike to be paid by bank transfer or electronic means. Expenses paid in cash are increasingly rejected by the tax agency.


Intra-community transactions

Purchases and sales of goods and services between businesses in the European Union are subject to special taxation regulations.

  • When selling to other companies in the EU, the ‘zero rate’ may apply: If you sell or export goods to companies in other countries in the EU – what’s known as ‘Intra-Community Supply’ – you do not have to charge VAT on the invoice if the company you’re selling to is VAT-registered.
  • If you provide services to companies in other EU countries, you normally don’t charge VAT because these operations are exempt as well. However, special rules apply to some services like communications and media services.
  • Selling to a private person in other EU countries: If you sell goods or services to a person in a country within the EU, you must include your country’s VAT on invoices – as if it were a business transaction in your own country.
  • The ‘reverse charge’ when importing goods or services: If you import products or services from companies or professionals from other countries in the EU – what’s known as ‘Intra-Community Acquisitions’ – you must report VAT even though the invoice received will say 0% VAT. This VAT is known as acquisition tax and you can normally reclaim this if the acquisitions relate to VAT taxable sales.

Applying the reverse charge

There will be no VAT on the invoice when you buy a product or a service from another VAT-registered company in the EU. This means that you are responsible for calculating and reporting the numbers to Hacienda.

If your EU provider is invoicing you with VAT, you should ask them to invoice you without VAT instead and provide them with your EU VAT number and company details.

Similarly, if you’re the one selling a product or a service to another VAT-registered company in the EU, you do not VAT the invoice. The buyer calculates and reports his own VAT in his home country.


Requirements for intra-community transactions

Follow these guidelines when dealing with transactions in the EU:

  • If your customer can provide you with a valid EU VAT Registration number, you can apply the zero rate of VAT to the sales. The VAT will be due in the destination country from the customer on acquisition of the goods
  • All companies, freelancers and other professionals wishing to work with Intra-Community transactions, must register for an EU VAT number in the member state where they reside. In order to be able to apply the EU VAT mechanism, the corresponding customer / provider must also reside in a member state and possess the EU VAT number.
  • After receiving your customer’s VAT number, you should check that the VAT number is given in the right format for that country and that it matches the customer’s name and address. You can check any EU VAT number for a customer or a provider through the online VIES validation system to see if the number has been authorized for intra EU transactions.
  • You must mention both the seller’s and buyer’s EU VAT registration numbers on the invoice. You must also obtain and keep valid evidence that the goods have left the country of origin within certain time limits to be able to zero rate.
  • Finally, you must include a legal text in your EU invoices mentioning the VAT excemption and the applicable legislation. For example “Factura exenta de IVA por aplicación de la Directiva 2006/112/CE y el art. 25 de la Ley 37/1992” or “Invoice exempt of VAT according to EU Directive 2006/112/CE and article 25 of law 37/1992”.

Our software includes a free CRM and invoicing module for our clients that allows them to always issue correct invoices. We also check all incoming invoices to make sure they are legally valid and deductable as expenses.

info

The information contained herein is of a general nature, and subject to changes. Applicability to your specific situation should be determined through consultation with our tax or legal advisors.