If you have a company or you are a self-employed worker, it is very likely that on more than one occasion you have been forced to pay in advance a payment that would correspond to your client, with the aim of speeding up procedures when performing a job.
These types of expenses are included in the final invoice as supplemented expenses,and it is important to know what exactly they are, and also how they should be included in the invoices in the correct way. Here’s everything you need to know.
What are the expenses supplemented?
The expenses supplemented refer to those expenses that an employer or self-employed worker pays on behalf of a client,to try to streamline the procedures and get the work completed within the established deadlines.
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An example would be a lawyer, who files a lawsuit in court on behalf of the person he represents. The fees that must be paid to file such a claim would correspond to the person represented, but they are paid by the lawyer to expedite the procedure, including that expense in the final invoice as an expense supplemented, along with the fees corresponding to the services provided.
How to include the expenses supplemented in the invoices?
Once we know what the expenses are, we will see how they should be included in the invoices correctly. To do this, the first thing is to know the three requirements established by the Treasury to consider an expense as a supplement:
- That they are sums paid in the name and on behalf of the customer:The expenses supplemented will be justified by an invoice issued in the name of the final customer. In case the expense was in the name of the professional (person who has paid the payment), we would not be facing an additional expense, but a reimbursable expense.
- That the payment of the supplemented expense is made with the express consent of the client,either in writing or verbally.
- That it is possible to prove the amount of the expenses incurred,by any means permitted by law.
When making the invoice in the name of the client who has contracted the services, the expense supplemented must be included separately from the rest of the concepts,so that it can be correctly identified, avoiding any type of doubt.
The supplemented expenditure is included in the total,i.e. with VAT included, since it was already paid when the payment was made. In addition, no restraint shall be appliedto the supplemented. This means that it is not part of the tax base for tax purposes, but is added at the end to calculate the entire amount to be collected.
Article 78 of the VAT Law: “Sums paid in the name and on behalf of the customer are not included in the tax base.”
According to our tax advisors, it is recommended that when presenting the invoice, a copy of the invoice of the payment of the supplement itselfis attached, in order to justify the operation before a tax inspection.
It is also convenient to have a book in which all the expenses supplemented are recorded,or even a specific bank account, in which the concept of all the income made contains the term “supplemented”.
What are reimbursable expenses?
It is often common to confuse the expenses supplemented with the reimbursable expenses,so below we will tell you what they consist of, so that you are clear about the difference and do not make any mistake when billing them.
We have already said that the expenses supplemented are those that a professional pays on behalf of his client, but if the invoice were in the name of the entrepreneur,we would be facing a reimbursable expense.
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This would be the case of a professional who has previously agreed with his client, that in addition to paying the fees corresponding to his services, he must also take care of all the necessary expenses to be able to offer that service,such as travel invoices, per diem, purchase of material, etc.
It is important to be clear that the reimbursable expenses will always be in the name of the professional who offers the service,but they will be paid by the client.
In case you wanted to include the reimbursable expenses in the invoice issued to your client, you should add them to the consideration for your services, applying the VAT and the corresponding withholding. The amount to be included must be composed only of the taxable amount of the invoice paid, not including the VAT of the same.
In addition, reimbursable expenses are not free of income for personal income tax or corporation tax purposes.
In short, the expenses supplemented are those expenses that a professional pays on behalf of a client, with the aim of expediting procedures to be able to carry out the contracted service. These expenses are justified in the final invoice in the name of the client, and are included separately to the rest of the concepts by the corresponding fees.