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Pricing and Taxes

Understand how Frihet calculates prices, applies taxes, and manages withholdings. Each invoice line item has its own tax logic.

Price Structure​

Frihet differentiates between three key concepts:

Unit Price (Taxable Base)​

The price without taxes:

  • It is the amount on which VAT/IGIC is calculated
  • It is the amount declared on tax invoices
  • It is the one that changes when you update a product
  • Example: 1,000 EUR

VAT/IGIC (Indirect Tax)​

Added to the price:

  • VAT 21%: Most services and products
  • VAT 10%: Some food, transport, lodging
  • VAT 4%: Books, magazines, newspapers
  • IGIC 7%: Canary Islands (replaces VAT)
  • IPSI: Ceuta and Melilla
  • Exempt: No tax (e.g., financial services)

Calculation:

Base price:      1,000 EUR
VAT 21%:         + 210 EUR
Client total:    1,210 EUR

The invoice shows both the base price and the VAT broken down.

IRPF (Withholding Tax)​

Subtracted from the price for certain services:

  • 15%: standard withholding for self-employed professionals
  • 7%: reduced rate for new self-employed workers during their first two years of activity
  • No withholding: most products

Calculation:

Base price:      1,000 EUR
VAT 21%:         + 210 EUR
IRPF 15% (withholding): - 150 EUR
Client total:    1,060 EUR
(your client withholds 150 EUR and pays it to the Tax Agency on your behalf)

On the invoice, it appears as "IRPF withholding" or "income tax withholding".

Calculation per Line Item​

Each invoice line item has its own tax regime:

Example 1: Physical Product with VAT​

Product:          Samsung Monitor
Quantity:         2
Unit price:       200 EUR
Subtotal:         400 EUR
VAT 21%:          84 EUR
Line total:       484 EUR

Frihet sums all line items for the invoice total.

Example 2: Service with VAT + IRPF​

Concept:          Web Development (30 hours)
Price/hour:       50 EUR
Subtotal:         1,500 EUR
VAT 21%:          315 EUR
IRPF 15%:         -225 EUR (withholding)
Line total:       1,590 EUR (1,500 + 315 - 225)

Your client pays 1,590 EUR and withholds 225 EUR of IRPF, which they pay to the Tax Agency on your behalf.

Example 3: Tax-Exempt Service​

Concept:          Financial Consulting
Subtotal:         800 EUR
VAT:              Exempt (0%)
IRPF:             Exempt (0%)
Line total:       800 EUR

No taxes or withholdings.

Applying Taxes on Invoices​

By Product (Default)​

Each product in your catalog has taxes configured:

  1. You create product "Web Development": VAT 21%, IRPF 15%
  2. You add it to an invoice
  3. Frihet automatically applies those taxes

Modify per Line Item​

If you need to change for this specific invoice:

  1. On the invoice, click on the line item
  2. Open Taxes (collapsible section)
  3. Change VAT: 21% → 10%
  4. Change IRPF: 15% → 0% (e.g., foreign client exempt)
  5. It recalculates automatically

This change only affects this invoice. The product retains its original configuration.

Discounts​

Discounts are applied before calculating taxes:

Original price:   1,000 EUR
Discount 10%:     - 100 EUR
Taxable base:     900 EUR (base for VAT)
VAT 21%:          + 189 EUR
Total:            1,089 EUR

Types of Discounts​

Line-item discount:

Applicable to each product. Appears as % or absolute EUR:

Development: 1,500 EUR
Discount: -10% (150 EUR)
Subtotal: 1,350 EUR

Global discount (full invoice):

Applies to the total before summing VAT:

Invoice subtotal:  5,000 EUR
Discount 5%:       -250 EUR
Taxable base:      4,750 EUR
VAT 21%:           +997.50 EUR
Total:             5,747.50 EUR

Discounts vs. Complimentaries​

  • Discount: Reduces the price, appears on the invoice, client sees the reduction
  • Complimentary: Free line item (e.g., referral gift). Appears as a product with 0 EUR

Use discounts for public negotiations. Complimentaries for internal gifts.

Quantity and Unit Price​

Frihet applies:

Line total = Unit price × Quantity

But allows dynamic changes:

Example: Variable Quantity​

Product:        Senior Developer
Quantity:       3.5 hours (you can enter decimals)
Price:          80 EUR/hour
Subtotal:       280 EUR

Allows working with hours, fractional days.

Change Price on Invoice​

If a client negotiates a special price:

  1. On the invoice, select the line item
  2. Edit Unit price: 1,200 EUR → 1,050 EUR
  3. It recalculates automatically

The change is only for this invoice. The base product is not modified.

Different VAT Rates​

On the same invoice, different rates can coexist:

Line 1: Book                   50 EUR  (VAT 4%)      → 52 EUR
Line 2: Consulting service     1,000 EUR (VAT 21%)   → 1,210 EUR
Line 3: Software               500 EUR  (VAT 21%)     → 605 EUR
─────────────────────────────────────────────────────
Subtotal:  1,550 EUR
VAT 4%:      2 EUR
VAT 21%:   345 EUR
Total:   1,897 EUR

Frihet automatically groups by rate in the tax breakdown.

IGIC (Canary Islands)​

If you are in the Canary Islands:

  • Frihet automatically replaces VAT with IGIC
  • In-force rates in the selector for current invoices (tax point from 1 January 2020 onward, filtered by issue date): 0% (zero rate), 3% (super-reduced), 7% (general), 9.5% (increased), 15% (increased), and 20% (special)
  • Historical 13.5% rate (in force until 31 December 2019, replaced by 15% from 2020): not offered on current documents; it only appears on documents dated on or before 31 December 2019 so they can be declared or rectified in Form 420
  • Statutory 1% and 5% rates (art. 32.1, art. 33 bis, art. 35, and art. 38.Cuatro of Canary Islands Legislative Decree 1/2025): in force by law for specific cases, but not included in the default selector or declarable in Frihet's automated Form 420 and Form 425 calculation
  • VAT and IGIC cannot be mixed on the same invoice

Frihet detects the client's region and applies it automatically. If there's an error, edit it on the invoice.

IPSI (Ceuta/Melilla)​

In Ceuta and Melilla:

  • IPSI replaces VAT
  • Rates in Frihet's selector: 10% (general), 4% (reduced), and 0% (exempt), alongside the municipal ordinance brackets (0.5% to 10% depending on the good or service)
  • Applies only if the client is in those autonomous cities

IRPF Withholding Tax​

When it Applies​

Withholding applies when the issuer is self-employed and the recipient is a company or a professional. Frihet uses it only on domestic invoices. Standard rate 15%; new self-employed workers, 7% for the first two years. You can set a default rate in Settings → Billing, and change it per product or on the invoice itself.

It does not apply to sales to final consumers or when the client is foreign.

Calculation​

Frihet calculates the withholding on the invoice and subtracts it from the total:

Taxable base:           1,000 EUR
IRPF 15% (withholding):  -150 EUR
Client pays:              850 EUR (before VAT)

The withholding is not an extra cost for your client: it is deducted from the amount they pay you, and they pay it to the Tax Agency.

Settlement​

The withholdings applied to you are deducted in your IRPF return. To review your tax filings, go to Finance → Taxes.

Equivalence Surcharge (Retail Clients)​

The equivalence surcharge is charged by the supplier to a client who is a retail merchant under that regime. If you invoice such a client, tick Equivalence Surcharge in the invoice's tax zone card (only when issuer and client are both on the mainland). A single rate applies per invoice, the one matching the invoice's VAT rate (21% → 5.2%; 10% → 1.4%; 4% → 0.5%), on the whole base: if you need to mix VAT rates, issue one invoice per rate. The surcharge is calculated on the taxable base, added after VAT, and shown separately on the invoice:

Price:          100 EUR
VAT 21%:        21 EUR
Surcharge 5.2%: 5.20 EUR
Total:          126.20 EUR

You can also turn on Apply Equivalence Surcharge (R.E.) on the client record so it is ticked by default on their invoices.

Tax Breakdown​

To see the tax breakdown for a period, go to Reports and open the Tax Liability or Tax Period tab. Tax filings are in Finance → Taxes.

Common Issues​

"Client is foreign, what VAT do I apply?"​

Depends on the service:

  • Digital services to EU: Client's VAT (reverse charge, Frihet marks it)
  • Services outside EU: 0% VAT
  • Physical products: Varies according to customs

On the invoice, select VAT exempt and note "Export/Foreign service".

"I changed VAT on a product, but the old invoice doesn't update"​

By design. Completed invoices have historical prices. It's for auditing. Create a credit note if you need a correction.

"I have IRPF and VAT, how does it work?"​

Both apply:

Base:   1,000 EUR
+ VAT 21%: +210 EUR
- IRPF 15%: -150 EUR (on base)
= Total: 1,060 EUR

Client pays 1,060 EUR. Frihet settles IRPF separately.

Related: Product catalog · Invoicing taxes · Modelo 303 (VAT) · Modelo 420 (IGIC)

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