How to calculate VAT and personal income tax on an invoice?
Calculating VAT and income tax (IRPF) are basic procedures that everyone should know. A poorly prepared invoice, whether due to ignorance or an honest mistake, could result in a penalty from the Tax Agency. But the good news is that calculating them on your invoices is not as complicated as it might seem.
Basic concepts you should know
We must consider three basic concepts to understand their calculation:
Taxable base:
This is the price of a good or service without considering taxes or withholdings. Both taxes and withholdings are calculated based on the taxable base.
VAT (Value Added Tax):
This is the tax that applies to the consumption of products and services. It is calculated on the taxable base, and its main objective is to generate income for the State. The VAT percentage is usually calculated between 4%, 10%, or 21%.
As an interesting fact, this tax is called VAT in mainland Spain and Balearic Islands, while IGIC (Canary Islands General Indirect Tax) in the Canary Islands, and IPSI (Tax on Production, Services and Imports) in Ceuta and Melilla as they are considered import taxes.
IRPF (Personal Income Tax):
This is the percentage you must withhold from your self-employed client or company if your activity requires it.
In the first 3 years, you can choose between 7% and 15%; after that period, the standard percentage is 15% except for some exceptions.
How to calculate VAT and IRPF?
Remember that VAT is a tax added to the taxable base, while IRPF is a withholding that we subtract. Considering this, they can be calculated using these formulas:
VAT
IRPF
Example
Let's say Maria does a photography job for a company for 1200 euros. Where:
- 1200 euros is the Taxable Base.
- VAT must be calculated at 21%.
- IRPF must be calculated at 15%.
To calculate VAT, this formula should be used:
- 1200 euros (Taxable base) × 0.21 (VAT in decimals) = 252 euros (VAT)
- 1200 euros (Taxable base) + 252 euros (VAT) = 1452 euros (Total price with VAT)
To calculate IRPF, this formula should be used:
- 1200 euros (Taxable base) × 0.15 (IRPF in decimals) = 180 euros (IRPF)
To calculate how much Maria should charge the company, this formula should be used:
- 1200 euros (Taxable base) + 252 euros (VAT) - 180 euros (IRPF) = 1272 euros (Total amount)
How can I calculate VAT and IRPF in a simpler way?
If you're afraid of making mistakes or need to save time in this process, try our VAT and IRPF calculator. This tool will handle all the necessary calculations to keep your taxes in order.
It's quick and easy to use. Automate your calculations with just a few clicks!