Indeed, when you are self-employed and you have to issue an invoice, you have to deduct a percentage for personal income tax. But I understand that this is not always the case, only in the case of billing a company.
If you invoice a company you have to add VAT and subtract income tax. Something like this:
In the case of, for example, billing 500 euros:
+ 16% VAT 80 euros
– 15% income tax 75 euros
TOTAL invoice = 500 + 80 – 75 = 505 euros
The IRPF percentage is paid by the company to your account in the treasury and in your annual income statement you will have all the IRPF percentages that the companies have entered into your account already paid. Then your benefits will be calculated by counting everything you have entered and everything you have spent. Depending on the benefit, you will have to pay one percentage or another to the treasury (the more you earn, the more percentage of your income you have to enter the state coffers, there are tables of income and percentages that you have to pay).
Let’s say that you earn a total of 10,000 euros in the year and for those earnings you have to pay 5% to the treasury. So you owe 500 euros to the treasury. But suppose that, with all the income tax withholdings that companies have made to you during the year, you have already paid 1,500 euros to the treasury. In that case, your account with the treasury would return 1,000 euros, 1,500 for what the companies have paid into your account during the year minus 500 euros that you have to pay in taxes for your activities.
This is a basic example that does not have to be adjusted in percentages and other things, to reality. In addition, there are many factors that influence when calculating the amount you must pay in taxes for a year, such as whether you have a mortgage, whether you have a pension plan or a home account.
Income tax percentage to be deducted from invoices
The IRPF that you must discount on the invoice is variable. The normal thing is 15%, but as I understand it, if you are in the first 6 months of activity as a freelancer, you can only retain 7%.
In addition, I have seen cases in which the self-employed person had to retain 20%, but I don’t know why that was exactly.
But going back to the cases in which you have to pay personal income tax, I think that personal income tax does not always have to be applied, because for example we can be issuing an invoice to an individual and in those cases it does not make sense to discount personal income tax because the individual does not nothing is going to enter the treasury because you have issued an invoice. In the case of billing other freelancers, I don’t know how it would work.
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