Disbursements: what they are and how to invoice them

A disbursement (gasto suplido) is an expense that is payable by the client, that you advance on the client’s behalf, and that the client will later reimburse to you.

Payments of official fees, shipping charges, or insurance premiums, among others, are clear examples of disbursements. In these cases, the professional is the one who pays the amount due, on behalf of the third party, in order to carry out the formalities requested by the client.
This disbursement must be included in the invoice you issue to the client for reimbursement and must be supported by documentary evidence.
Requirements for an expense to be treated as a disbursement
For an expense to be treated as a disbursement, it must meet three requirements:
• The supporting document for the disbursement must bear the name of the end client, not that of the business handling the formality.
• There must be proof of its payment.
• It must have been paid because the client expressly requested it, either verbally or in writing.
How are disbursements invoiced?
Disbursements are included in the invoice issued to the client as an item separate from the fees and the taxes.
Furthermore, their amount is not taken into account when calculating the output VAT (IVA) (because they do not form part of the tax base), nor when calculating the Personal Income Tax (IRPF) withholding, where applicable.
Sample invoice with disbursements
A disbursement does not represent a service that the professional provides to the client, so it is neither an expense nor income for the self-employed worker.
Disbursements are always invoiced separately on the invoice, that is, on a line separate from the amount for the professional services provided to the client. In other words, the disbursement must not be added to the tax base of the services provided, since:
• The professional services provided are subject to VAT and IRPF
• The disbursement is not subject to VAT or IRPF
Thus, the disbursement will appear separately on an invoice under the description “disbursement” or “amount paid on behalf of the client.”
Otherwise, there is no specific template for an invoice with disbursements. Any ordinary invoice containing the usual information may include “disbursement expenses” as an item separate from the professional services provided.

How to account for invoices with disbursements
The disbursements that a professional includes in their invoices are not deductible for the professional; however, they will be deductible for the end client, who is the one who actually pays them.
The disbursement invoice held by a professional must be issued in the name of the end client, because the end client is the one who bears the tax burden and, therefore, could deduct it as an expense.
The self-employed worker will record the disbursement as a cash inflow and outflow for the payment made, whereas the end client will record it as an ordinary expense without taxes, deducting the total amount in the business’s profit and loss account.
Are disbursements and client advances the same thing?
The self-employed worker may receive, before providing the service, the money to cover all those disbursements. These payments are known as client advances (provisiones de fondos) and are accounted for and recorded separately. Like disbursements, they represent an atypical expense for the professional and, as such, require separate treatment.
Specifically, professionals who are taxed under the direct assessment method (estimación directa) are required by law to keep a register of client advances and disbursements. That is, a record of all those invoice amounts corresponding to advances and disbursements that they have collected from their clients, so that there is a record of them in the event of a review by the tax authorities.
The following information must be included in this register:
• The date of the transaction.
• The type of transaction: whether it is a disbursement or an advance.
• The payer of the advance or the recipient of the disbursement.
• The amount.