BASQUE COUNTRY AND NAVARRA: Fees, disbursements or provisions of funds?

The treatment of the payments depends on whose name the invoices documenting the expenses are issued.

Do you know when those payments will generate higher fees?

If the expenses are in the professional's name and then they bill them to their client, what they receive will represent higher fees. Therefore, the professional must issue an invoice and charge the corresponding VAT and bear the applicable withholding (e. g., transportation, maintenance, or accommodation expenses that the professional incurs and then bills to their clients).

And when is it a disbursement?

If the professional incurs expenses whose direct beneficiary is their client, so that the invoice is in the client's name, the amount they charge for it is considered a disbursement. They should not charge VAT or bear withholding, as it is not considered income (e. g., when an advisor processes the registration of a deed and pays the registration cost, and then the client reimburses that cost).

And what about the provision of funds?

It is common for professionals, before providing a service, to request a provision of funds for all or part of the fees and disbursements they will incur:

• For the part of the provision corresponding to the fees, the professional receives an advance, so an invoice must be issued and VAT charged. This amount is also subject to withholding, and the professional will be able to deduct the withholding in the IRPF for the year in which they account for the income derived from the service.
• For the part of the provision covering future disbursements, VAT should not be charged nor withholding in the IRPF.

Our professionals will analyze your case and explain how you should be taxed.