Carlos receives a formal request giving him ten days to provide his VAT and income tax books in electronic format. Until then he had kept invoices in folders and a monthly list of totals. That does not allow each return to be rebuilt. As a self-employed person he must keep books, though not always full accounts under the Código de Comercio, the Spanish Commercial Code. Under the simplified direct assessment method, the usual requirement is registers of sales and income, purchases and expenses, and capital goods; professionals add the register of fund provisions and outlays on behalf of clients.
The books depend on the scheme and the activity
There is no single list for everyone. A trading business under the normal direct assessment method may be obliged to keep accounts under the Commercial Code and the Plan General de Contabilidad, the Spanish chart of accounts. A business under the simplified method usually keeps record books. A professional under direct assessment also needs to record provisions and outlays.
| Usual situation | Income tax registers |
|---|---|
| Business under simplified direct assessment | Sales and income; purchases and expenses; capital goods |
| Professional under direct assessment | Income; expenses; capital goods; provisions and outlays |
| Trading business under normal direct assessment | Commercial accounts, with the applicable tax specialities |
| Objective assessment (modules) | Keeping supporting documents and specific books depending on activity and depreciation |
The income tax books can be combined with the VAT books if the file contains every field both taxes require. A single well-designed file is valid; a sheet that only adds up monthly income and expenses is not.
What each register must show
The income book, or book of invoices issued, identifies among other things the number and series, the date of issue and of the transaction, the recipient's tax number and name where applicable, the description, base, VAT rate and amount, withholding and total. Corrective invoices must be linked to the original and entered with the right sign and period.
The book of purchases and expenses, or of invoices received, records the supplier, its tax number, the invoice number, dates, description, base, VAT borne and VAT deducted. The last two can differ: bearing VAT does not mean you are entitled to deduct all of it. If an invoice is deducted in a period later than the one in which it was received, the book must make it possible to explain the difference with Modelo 303, the VAT return.
Capital goods are recorded one by one with their invoice, value, date of entry into use, depreciation and, for VAT where relevant, pro rata and adjustments. A computer depreciated over several years must not be confused with an ordinary expense used up on the day of purchase.
The book of fund provisions and outlays belongs to professional activities. A provision is money received on account of fees or expenses; an outlay (suplido) is an amount paid in the client's name and on the client's behalf that meets its requirements. Calling any re-invoiced expense an "outlay" does not change its treatment.
Format, order and keeping the records
You can keep the books in an application or a spreadsheet. They must be kept clearly and accurately, in date order, with amounts in euros and without alterations that hide the history. The Agencia Tributaria publishes standard layouts for importing data into Renta WEB, Pre303 and Modelo 130 and for answering requests.
Keeping the PDF of each invoice is not enough. The book is the structured index of the transactions and the invoice is its supporting document. Also keep contracts, statements, customs documents, evidence of business use and the files of the software that generated the records.
Entries must be made within the applicable deadlines, before the returns. Piling up documents until the end of the year encourages duplicates, gaps in numbering and deductions in the wrong period. If you correct an invoice, follow the corrective invoice procedure and keep both documents.
What Hacienda checks
In a formal request, Hacienda, the tax office, may ask for the books in electronic format and pick out specific transactions. It usually compares totals with Modelos 303 and 130 and the annual income tax return, cross-checks with clients and suppliers, numbering, dates, tax numbers and whether expenses are deductible.
A 420 € gap between the book and the 303
If the book of invoices issued for the quarter adds up to a base of 30,000 € at 21 %, output VAT starts from 6,300 €. If the 303 shows 5,880 €, there must be an identifiable difference, such as a 420 € corrective invoice. A general phrase about accounting adjustments does not replace the entry and the document.
Before handing anything over, check that each total on the form can be rebuilt from the records. Separate transactions outside the scope of VAT, exempt transactions, intra-Community transactions, reverse-charge transactions and the different rates. Also check that a negative balance has been treated as carried forward or refunded, and that assets such as the car have their degree of business use documented.
When a transaction is recorded
The invoice date, the transaction date and the date of collection or payment can all be different. The books must keep those fields so that the accrual rules and, where relevant, the cash accounting rules can be applied. Recording everything on the day of the bank movement can push a sale into another quarter or make input VAT appear before you have the invoice.
Carlos provides a service on 28 March, issues the invoice on 2 April and is paid on 20 May. The entry is not placed in May for convenience. The accrual has to be identified according to the transaction, the issue of the invoice and the relevant period. The bank statement proves the payment, but it does not replace that classification.
Invoices received are entered with their full details, and the deduction is exercised within the period allowed. If VAT is deducted later, the book may show a different deduction period; that is why the total recorded does not always match the 303 without adjustments.
A test before you hand the file over
You can state your activity, scheme and software in the self-employed form. Then export the books in the required format and reopen the file outside the software. Check that it has not lost leading zeros in tax numbers, dates, negative signs or characters. Sort by number to look for duplicates and gaps, and by tax number to spot suppliers written in several ways.
| Check | Question you must be able to answer |
|---|---|
| Numbering | Where is each invoice, and why are there gaps? |
| Periods | Which entries make up each 303 and each 130? |
| Deductibility | Why does the VAT borne differ from the VAT deducted? |
| Corrections | Which original does each document correct? |
| Banks | Can the relevant collections and payments be traced? |
Do not alter the book you handed over without keeping that version. If Hacienda asks about a difference, it must be possible to reproduce exactly the file provided and then document any correction.
How long to keep everything
The general four-year tax period does not allow you to destroy everything automatically after four years. There are capital goods with adjustment periods, pending balances, transactions with future effects and commercial-law obligations with their own time limits. Keep the documents for as long as they can have effects, and keep readable copies of formats that the software may stop opening.
If an invoice contains personal data, combine the duty to keep it with access and security measures. Nor do you need to hand over the whole history of the business with every request: provide what was asked for, with an index, within the scope and period stated.
Before sending, keep the request and calculate its deadline from the date it was actually notified. If the volume makes it impossible to answer in time, consider an extension within the permitted period; do not wait until the last day. Send the file with a short cover letter identifying columns, periods and attached documents, without adding transactions outside what was requested.
At Salama Tax we review books and reconciliations before a tax check is answered.