Retenciones: why tax is sometimes withheld before you get paid

You invoice 100 but get less deposited, and the receipt says “retención”. Don't worry: you're not being overcharged. A retención is a tax advance that whoever pays you hands to the DGI in your name. Here's how it works.

What a retención is

When you deal with certain clients (State bodies, large companies, banks), the law designates them as “withholding agents”: instead of paying you everything, they withhold a part and hand it to the DGI toward your tax (IRPF or IVA, as the case may be).

It's not an extra tax: it's a credit

What was withheld isn't lost: it's money you already paid of your tax. When you file, it's deducted:

The DGI says it clearly:

«El importe retenido será deducido del monto a pagar que surja de las referidas liquidaciones.»

In English: The withheld amount will be deducted from the amount to pay arising from the said liquidations.

Who withholds

Not just anyone withholds — only those the law designates as agents. Typically:

• The State and public bodies when they hire you.
• IRAE-taxpayer companies (on certain payments).
• Banks and others, on capital income.

What you have to do

Always keep the withholding receipt (resguardo): it's your proof. When you file your tax, you subtract the withholdings from what you owe. If too much was withheld, you can impute the excess to other obligations or request its refund via credit certificates.

At a glance

In short: a retención isn't lost money or an extra tax — it's an advance deducted when you file. Keep the receipts and, when in doubt, ask your accountant or the DGI.