Invoices and receipts: how do they differ?

Although at first glance they may seem similar, issuing an invoice is not the same as issuing a receipt.

In fact, if you carry out various commercial transactions on a daily basis, you should know that each of these documents serves a unique and specific purpose.

Here we explain the differences between an invoice and a receipt and how the Spanish tax authorities distinguish one from the other.

What is an invoice?

An invoice is a document that records a sale of a product or service. Both companies and self-employed workers can issue invoices.

Issuing an invoice is an essential step in the accounting of both the supplier and the customer, as it evidences and records the commercial transaction and provides specific details of the product or service, such as its price, tax, and date, among others.

To understand what an invoice is and to distinguish it from a receipt, it is important to know that an invoice must meet certain requirements:

• Issuer and recipient details: name or company name, tax domicile, and tax identification number (NIF) of both the issuer and the recipient.

• Date of issue and invoice number: the invoice must state the date on which it was issued and a unique number that identifies it.

• Description: a detailed description of the products or services provided.

• Tax base: the total value of the transaction or of the goods or services provided before any tax is applied.

• Tax rate: the rate applied to the tax base to calculate the percentage of tax.

• Breakdown of taxes: the taxes applied, such as VAT (IVA) or other excise taxes, must also be itemized, where applicable.

• Total amount: the amount the customer must pay. The total amount is the sum of the tax base and the taxes.

What information must an invoice contain?

For an invoice to be valid, both legally and commercially, suppliers must include a series of mandatory details documenting what is being sold, which parties are involved, and under what conditions. These requirements and mandatory details are key to understanding the difference between an invoice and a receipt. The details an invoice must include are:

• Invoice number.

• Date of issue.

• Tax details of the issuer and the recipient of the invoice.

• Description.

• Tax base.

• Tax rate.

• Total amount.

• Commercial Registry information (in the case of companies).

What is a receipt?

A receipt, on the other hand, is a proof of payment issued by the supplier to confirm that the relevant payment has been made. In other words, a receipt is an informative document that serves as proof of purchase.

However, it is essential for exchanging the product purchased or for making claims.

Receipts can be issued either on paper or in electronic form and usually contain basic information such as the product or service purchased, the quantity, the price, the taxes applied, and the total amount of the purchase.

With all this in mind, it is easier to understand the differences between an invoice and a receipt:

• Purpose: whereas an invoice operates as a formal request for payment, a receipt evidences that payment has been made.

• Issuance: an invoice is issued before payment is made, as advance notice of the transaction. A receipt, by contrast, is issued after the transaction to confirm payment.

• Information: an invoice requires a high level of detail, both mandatory and optional. A receipt, for its part, is a simplified document containing less information.

• Issuer and recipient: whereas an invoice must include the tax details of both the issuer and the recipient of the product or service, a receipt only includes the details of the supplier or issuer.

What information must a receipt contain?

In terms of the information it contains, a receipt is a simpler document than an invoice. Knowing these details will make the difference between an invoice and a receipt clearer. Because it is issued once the sale has been completed, a receipt simply includes the following:

• Products or services purchased (without extensive detail).

• Price.

• Quantity.

• Taxes applied.

• Total amount of the purchase.

How the tax authorities distinguish an invoice from a receipt

Understanding the differences between an invoice and a receipt is essential, especially when self-employed workers and companies must report expenses to the tax authorities. After all, the Spanish Tax Agency (AEAT) takes both documents into account to monitor commercial transactions.

In fact, any discrepancy between the invoices issued by suppliers and the receipts may raise suspicion and lead to a tax audit (inspection procedure).

To distinguish between a receipt and an invoice, the tax authorities look at deductible expenses:

• Invoice: makes it possible to deduct both VAT and Personal Income Tax (IRPF).

• Receipt: by contrast, with a receipt only IRPF can be deducted. This document does not allow VAT to be deducted, but it is valid for recording an expense in the Personal Income Tax return.