Client advances: how much to ask for, how to invoice them and when to give them back

In most Spanish firms, provisión de fondos names two different things. One is money on account of your fees. The other is money the client advances so you can pay the notary, the land registry or a certificate in their name. The first is yours as soon as it arrives, and the tax office knows it. The second never is.

The problem is not conceptual — every lawyer knows the difference — but operational. Both arrive in the same bank transfer, get logged on the same line, and by the end of the matter nobody remembers which part was which. This piece is about avoiding that: how much to ask for, what document to issue the day the money lands, and how to close the accounts when the matter ends.

What the professional rules say

The General Statute of the Spanish Legal Profession (Royal Decree 135/2021) provides in article 26 that fees are freely agreed between client and lawyer, and article 48 requires the lawyer to inform the client about fees and costs. The specific rules on advances, however, sit in the Spanish Bar’s Code of Conduct (Código Deontológico), approved by the General Council’s plenary on 6 March 2019.

Its article 16 — “Provisions of funds and payments on account” — covers the essentials:

• Payments on account of fees may be requested before or during the engagement (16.1).
• The amount must be proportionate to the expected needs of the matter and the estimated fee (16.2).
• Non-payment entitles the lawyer to decline, to make acceptance conditional, or to withdraw (16.3).
• A separate advance may be requested to cover disbursements (16.4).
• Every advance received must be acknowledged in writing, and payments on account are subject to tax and invoicing rules (16.5).

Article 19, on client and third-party funds, adds the part that tends to be forgotten: such funds go into a dedicated account, are not mixed with the firm’s money, cannot be used for payments — including the lawyer’s own fees — without express written authorisation (19.4), and any balance must be returned with an account (19.6), without holding on to it longer than necessary even if fees are owed (19.7).

The practical upshot: the “how much” is set by the proportionality in 16.2, not by distrust of the client; and if the client does not pay the advance, 16.3 gives you a way out, provided the withdrawal does not leave the client without a defence.

How much to ask for

There is no official percentage, and anyone who offers one should be treated with suspicion. What you can defend is a figure reasoned against the budget in the engagement letter. On a fixed-fee matter, an advance of 30% to 50% before filing is easy to justify; on hourly billing, the advance should cover the next phase you are about to carry out, not the whole matter.

Two working rules. First, the advance on fees and the advance for disbursements are requested separately, with separate amounts, even if the client pays both in one transfer. Second, the disbursement advance is calculated against specific, foreseeable costs — a certified notarial copy, a registry certificate — not as a general cushion.

The day the money arrives: an advance invoice

This is where most firms go wrong. They collect the fee advance, issue a “receipt”, and leave the invoice for the end. For tax purposes that does not work.

Article 75.Dos of the Spanish VAT Act (Ley 37/1992) provides that where a transaction gives rise to advance payments, VAT accrues when the price is collected, in whole or in part, for the amounts actually received. Article 2.1 of the Invoicing Regulation (Royal Decree 1619/2012) requires an invoice for payments received before the service is supplied. Where the client is a business or professional, article 11 of the same regulation allows until before the 16th of the month following accrual.

Put simply: the fee advance generates an advance invoice, with 21% VAT, in the quarter in which it is collected. If the “acknowledgement” required by article 16.5 of the Code is not an invoice, it fails the second half of that very paragraph.

IRPF withholding follows the same logic. If you invoice as an individual and the client is a business or professional, article 95.1 of the IRPF Regulation sets withholding at 15% of gross income, or 7% in the year activity starts and the two following years, provided the payer has been notified. Article 78.1 of the same regulation says the obligation to withhold arises when the income is paid. The advance is paid now, so withholding applies now, on the base of the advance invoice.

Disbursements are not income

The disbursement advance works the other way round. Article 78.Tres.3.º of the VAT Act excludes from the taxable base “sums paid in the name and on behalf of the client under the client’s express mandate”, subject to two conditions: you must be able to justify the actual amount of those costs, and you cannot deduct any VAT charged on them.

In practice:

• The disbursement advance carries neither VAT nor withholding when you receive it.
• The cost must be in the client’s name: the notary’s or registry’s invoice is addressed to the client, not to the firm. If it is in the firm’s name, it is no longer a disbursement but your own cost passed on, and then it is part of your taxable base.
• You need the express mandate. The engagement letter is the natural place to put it in writing.
• At the close, you account for it with the receipts and return any balance.

A full example, with numbers

A sole-practitioner firm in Valencia takes on, on 2 March 2026, a claim for a corporate client against a supplier. Budget in the engagement letter: €4,200 in fees plus VAT, and an estimate for notary and registry costs. The lawyer requests two advances: €1,500 on account of fees and €300 for disbursements.

Payment arrives on Monday 16 March. The firm issues the advance invoice the same day:

• Base: €1,500.00
• VAT 21%: €315.00
• IRPF withholding 15%: −€225.00
• Total payable: €1,590.00

The client transfers €1,590.00 against the invoice plus €300.00 as the disbursement advance: €1,890.00 in all. The client pays the €225.00 withheld to the tax office in its first-quarter Form 111; the firm reports the €315.00 VAT in its first-quarter Form 303, even though the matter is only weeks old. The €300.00 appears in neither return.

During the matter, a certified notarial copy costing €118.58 and a registry certificate costing €23.60 are paid in the client’s name: €142.18 in total.

The matter settles in July. The final invoice states the total fee of €4,200.00, deducts the base already invoiced in March with a reference to the advance invoice, and bills the remainder:

• Outstanding base: €2,700.00
• VAT 21%: €567.00
• IRPF withholding 15%: −€405.00
• Total payable: €2,862.00

Separately, the firm delivers the disbursement statement: €300.00 received, €142.18 paid with both receipts attached, €157.82 balance, refunded by bank transfer. It is not set off against the final invoice unless the engagement letter contains written authorisation to do so; article 19 of the Code is clear on that.

Had the matter closed before the advance was used up — say, the client terminates the engagement and only €1,000 of fees has been earned — the route is a corrective invoice for the difference under article 80.Dos of the VAT Act and article 15 of the Invoicing Regulation, refunding the €500 of base with its VAT and adjusting the withholding.

Why a provisional “receipt” is a bad idea

Our view, plainly: a fee advance should be invoiced on the day it is collected, every time, even if the client would rather have “one invoice at the end”. There are three reasons. The tax reason is set out above: VAT accrues on collection. The second is evidential: if the matter goes badly and you end up claiming fees — even through a jura de cuentas — a clean sequence of advance invoices and a final invoice defends itself. The third is systemic: with VeriFactu on the calendar, a receipt that later becomes an invoice with a different date is exactly the kind of workaround a chained, unalterable record exposes.

For how this fits into the rest of the billing cycle — capturing work as it happens and having the invoice come out of the matter — see the piece on automating your firm’s billing.

How Mandato handles it

In Mandato’s billing, the fee advance and the disbursement advance are recorded in the matter as separate items. The first generates an advance invoice with its VAT and withholding; the second sits as a client balance against which costs are charged, each with its receipt. When the matter closes, the final invoice deducts the advances already invoiced, and the disbursement statement shows the balance to be returned. Invoices are issued VeriFactu-ready. The tax treatment of any particular case is still for your adviser; what the software prevents is the moment, eight months later, when nobody remembers whose money part of that transfer was.