Key billing concepts you should know

Content:

Invoicing is one of the most repeated actions in the daily life of a self-employed person or a business. Issuing invoices is the basis for collecting payment for services rendered or products sold, as well as being an essential tax requirement.

Without correct invoicing you could face problems with the Tax Agency .

If you're just starting out with invoicing, this guide will help you understand the key concepts for successfully managing your business's invoicing.

Key concepts for correct billing:

1. Invoice number

Every invoice must have a consecutive number , maintaining continuity in its sequence. Furthermore, they must be issued in chronological order.

2. Tax Base, Tax Quota and Tax Rate

Tax Base: Amount on which taxes are applied.

Tax Quota: Amount you have to pay in taxes.

Tax Rate: percentage of tax applied to the tax base. In Spain, VAT has three main rates: 4%, 10%, and 21%.

For example: We have an invoice of 100 Euros to which we are going to apply the general VAT (21%):

• The tax base is 100 Euros, since it is the amount before taxes.

• The Tax Quota will be calculated by multiplying the taxable base (100) by the tax rate (21%), converting the percentage to decimal (0.21) and calculating.

Tax Rate = Taxable Base x Tax Rate -> 100 x 0.21 = 21 Euros

To this 100 Euro bill, 21 Euros in taxes would have to be added.

3. VAT quota charged or accrued

VAT that the self-employed person or company charges the client and that must subsequently be paid to the Treasury quarterly using Form 303.

4. VAT quota supported

VAT paid by self-employed individuals or companies on purchases from suppliers. In most cases, it can be deducted on Form 303.

5. VAT exemption

This occurs when you are not required to include this tax. According to Article 20 of the VAT Law (Law 37/1992), healthcare and education services are exempt from this tax .

6. Type of retention

Self-employed individuals must apply a personal income tax withholding on their invoices, that is, deduct a percentage that will be allocated to this tax.

Withholdings are grouped into:

• 15% (general)
• 7% (new self-employed workers during the first two years)
• 19% (commercial premises rentals)

7. Taxpayer or taxpayer

Natural or legal person responsible for issuing or receiving invoices and complying with tax obligations.

8. Expense Supplied

Expense in the client's name paid by the supplier or intermediary . Must be reflected on the invoice without applying VAT or personal income tax.

For example: If an agency pays for a service on behalf of its client, this expense for them would be reflected in the invoice as a supply.

9. Tax address

It is the address where you register your business.

10. Ordinary invoice

This is the basic billing document, proving the sale of a product or service. You can find more information about the invoice here.

11. Electronic invoice

It's a regular invoice, but in digital format, with the same legal validity as a printed invoice. Starting in 2025, it will be mandatory for all transactions between businesses and self-employed individuals. That's why it's important to have good invoicing software accredited by the Tax Agency.

13. Corrective invoice

It is issued when an original invoice needs to be corrected . It may modify the tax base or include missing data.

14. Summary invoice

Invoice that groups together several transactions carried out in the same month for the same person.

For example: A gas station that bills a transport company monthly for accumulated refueling.

15. Proforma invoice

It is a document with no fiscal validity that contains a commercial offer. It should not be numbered like a regular invoice.

Conclusion

Proper invoicing is key to complying with tax regulations and avoiding problems with the Treasury.

Applying the right rules, knowing the exemptions and withholdings, and using digital tools for electronic invoicing will help you keep your accounts in order.

Do you have questions about how to invoice for your business?

At InnoTaxes , we're here for you. Contact us with any questions or send us a WhatsApp message , and we'll get back to you faster and more personalized.

We have helped many professionals with their business invoicing , you can be next .