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Calculate Invoice Taxable Base

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Calculate Invoice Taxable Base

Have you tried to calculate invoice taxable base starting from the total and thus find the taxes? In this article, we are going to explain all the possible options, which are many!

What is a taxable base?

The taxable base is the amount of the invoice on which we apply taxes, and that matches the price of your product or service.

Let’s look at an example. You are a translator and you estimate a translation for a private client at € 250.00 + VAT. That is how the breakdown would appear on your income invoice:

Taxable base

 

(translation price) 

€ 250,00 
VAT 21%€ 52,50
TOTAL€ 302,50

 

So that you can quickly identify which table you should apply depending on the activity you carry out, we are going to make the following division:

TABLE 1. You carry out a business activity

TABLE 2. You develop a professional activity

TABLE 3. Your business is the retail trade activity (including e-commerce)

 

TABLE 1. YOU CARRY OUT A BUSINESS ACTIVITY

You develop a business activity (your invoices are with VAT and without withholding), and you want to charge your client an invoice for a total of € 250.00. 

In the following table, we explain what operation you have to do to calculate the taxable base of your invoice based on the VAT you apply.

Invoice at…OperationExample result
21% VATdivide the total by 1,21250 / 1,21 = 206,61
10% VATdivide the total by 1,10 250 / 1,10 = 227,27
4% VATdivide the total by 1,04250 / 1,04 = 240,38

 

TABLE 2. YOU DEVELOP A PROFESSIONAL ACTIVITY

Whenever you carry out a professional activity and issue invoices to Spanish companies or freelancers, your invoices should include withholding, but you should not apply it if you invoice individuals.

On the other hand, there are professional activities subject to VAT (most of them) and others exempt (you do not apply any VAT type). Those subject to VAT may be subject to 21%, 10% or 4%.

With these variables, there are different options that we are going to reflect in the following tables, so you can focus on the calculations that apply to the type of invoice you want to make.

All the examples have the same assumption: you will issue an invoice to a client with a total amount of € 250.00, and based on that data, you want to know the tax base.

You carry out a professional activity subject to withholding and VAT

 

(for example, you are going to bill a Spanish company)

Invoice at…    I retain the…     OperationExample result            
21% VAT      7% IRPF        multiply the total by 100 and divide it by 114                                              250 x 100 / 114 = 219,30                                 
21% VAT15% IRPFmultiply the total by 100 and divide it by 106250 x 100 / 106 = 235,85
10% VAT7% IRPFmultiply the total by 100 and divide it by 103250 x 100 / 103 = 242,72
10% VAT15% IRPFmultiply the total by 100 and divide it by 95250 x 100 / 95 = 263,16
4% VAT7% IRPFmultiply the total by 100 and divide it by 97250 x 100 / 97 = 257,73
4% VAT15% IRPFmultiply the total by 100 and divide it by 89250 x 100 / 89 = 280,90

 

You carry out a professional activity subject to withholding but exempt from VAT

 

(for example, you are going to bill a Spanish company) 

I retain the…OperationExample result
7% IRPFmultiply the total by 100 and divide it by 93250 x 100 / 93 = 268,82
15% IRPFmultiply the total by 100 and divide it by 85250 x 100 / 85 = 294,12

 

You carry out a professional activity only subject to VAT and without withholding

 

(for example, you are going to bill an individual) 

Invoice at…OperationExample result
21% VATdivide the total by 1,21250 / 1,21 = 206,61
10% VATdivide the total by 1,10 250 / 1,10 = 227,27
4% VATdivide the total by 1,04250 / 1,04 = 240,38

 

TABLE 3. YOU DEVELOP THE RETAIL TRADE ACTIVITY (traditional or e-commerce)

In this situation, the problem is similar, but it is not the same. The self-employed who dedicates themselves to retail trade (in its traditional form or through e-commerce) do not usually have problems calculating the tax base of the products they sell because they are not obliged to make VAT declarations.

They only have to consider the product’s purchase price, including their profit margin, and thus put the sale price including VAT.

With an example, you will see it better…

Imagine a decoration items merchant who buys 20 centrepieces from a Spanish supplier for a unit value of € 12.00, excluding taxes. The invoice that the supplier will send you will be as follows:

20 centrepieces

 

(€ 12.00 / unit)

€ 240,00
VAT 21%€ 50,40
RE 5,2%€ 12,48
TOTAL€ 302,88 

 

So the cost price for the merchant is € 15,14. If we apply a 20% margin to that price, the retail price (RRP) will be € 18,17.

“Recargo de equivalencia” or RE

And you may wonder what RE 5.2% is? Well, it is the equivalence surcharge (“recargo de equivalencia“). It is an amount that the wholesale supplier collects in addition to VAT, and in return, administrative and tax tasks are simplified since you do not have to submit VAT returns. 

And what if you make purchases abroad?

As you have seen, the assumption when purchasing goods from Spanish wholesalers does not generate much trouble. But what happens when the self-employed retailer makes purchases abroad? Let’s look at another example…

Let’s imagine a freelancer who is dedicated to the business of retail baby seats internationally and using his website.

The purchases are made in Germany, and since they are high in ROI, both he and his supplier invoice him without German VAT. Let’s imagine that the price of the baby chair is € 200.00.

But, what happens in these cases where the supplier is not Spanish and therefore cannot charge neither Spanish VAT nor RE? We will have to use another system to comply with the equivalence surcharge regime.

Form 309 to settle custom taxes

One option is to settle customs taxes by indicating it appropriately and paying VAT and the corresponding RE. But what if the merchandise doesn’t go through customs? We have to use form 309 that is presented quarterly and in which the input VAT and the RE not paid in these operations are entered. 

In both cases, € 42 of VAT and € 10.40 of RE will be settled, assuming a product purchase cost that amounts to € 252.40.

Once the purchase is regularized, we can sell the product with the corresponding VAT, considering that the entire amount of the invoice is income for us. 

That is, if we sell the chair for € 250 + VAT (€ 302.50), the profit we will obtain from the sale will be € 50.10 (302.50 – 252.40).

Calculate the final cost of acquiring a product

With this table, you can easily calculate the final acquisition cost of the product that you purchase abroad based on the VAT rate applied to the product. 21% is the generic type, 10% applies, for example, to prescription glasses, and 4% applies, for example, to books. 

In the example, we buy products worth € 250.00.

How to calculate the acquisition cost if you buy abroad
The product is charged a VAT of…REOperationExample result
21%5,2%multiply the value of the product by 126,2 and divide it by 100.250 x 126,2 / 100 = 315,50
10%1,4%multiply the value of the product by 111,4 and divide it by 100.250 x 111,4 / 100 = 278,50
4%0,5%multiply the value of the product by 104,5 and divide it by 100.250 x 104,5 / 100 = 261,25

 


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