IRPF explained in English

IRPF withholding is one of the most confusing parts of Spanish invoicing for foreign business owners. Here's a plain-English explanation with a real example.

What is IRPF?

IRPF stands for Impuesto sobre la Renta de las Personas Físicas — Spain's personal income tax. As an autónomo (self-employed person), you pay income tax on your earnings each year.

IRPF withholding is a system where certain clients — Spanish companies and registered autónomos — deduct part of your invoice and pay it directly to the AEAT (Spain's tax office) on your behalf. Think of it as your client prepaying part of your income tax for you.

A real example

You're a freelance designer invoicing a Spanish company for a logo project:

• Service fee: €600
• IVA (21%): €126
• Subtotal: €726
• IRPF (−15%): −€90
• Total your client pays you: €636

Your client pays you €636 and pays the €90 IRPF directly to AEAT (via Modelo 111). You still declare the full €600 as income on your annual tax return.

IRPF rates

• 15% — Standard rate for most autónomos
• 7% — Reduced rate for new autónomos in their first 3 years of activity
• 2% — Agricultural activities (specific cases only)

When does IRPF apply?

IRPF withholding applies when:

• You are an autónomo providing professional services
• Your client is a Spanish company or registered autónomo
• The services are listed in AEAT's regulated activities

IRPF does not apply when invoicing private individuals, international clients outside Spain, or for most product sales.

If you're unsure whether IRPF applies to your invoices, ask your gestor — it's better to confirm before issuing an invoice than to correct it afterwards.