Deposits and milestone payments to reduce unpaid-work risk

Terms used

• Anticipo — The anticipo is an advance: part payment of the price, with no other legal effect, and refundable if the contract is not performed.
• Señal — The señal is a sum given as proof of a contract or as a guarantee, with legal consequences if someone withdraws.
• Arras — The arras are a sum given when a contract is made; by default the giver loses it, or the receiver returns it doubled, on withdrawal.
• Depósito — The depósito is handing over something for safekeeping, or in practice a guarantee returned at the end.
• IVA — The IVA is Spain's value-added tax, charged on invoices for most services.

Key rules

• Advance IVA: IVA is due when you receive an advance, so invoice the advance with IVA and make the final invoice cover only the balance.
• In writing: Put the advance, milestones, acceptance criteria and payment deadlines in a signed written contract.
• Wording: Call the advance an anticipo so it is not mistaken for arras, which can be lost or returned doubled.
• Typical advance: Advances of 30% to 50% are common for projects, but these are market habits, not legal limits.

Asking for an advance is normal and legal

Advances and staged payments are common in Spanish freelance work, and they are fully workable if you set them out clearly in a written contract. They matter most with new clients and bigger projects. Larger clients may push back or prefer to pay on delivery, so be ready to negotiate.

How much to ask for

Typical advances run from 20% to 50% of the fee. For projects, 30% to 50% is common. These are market habits, not legal limits, and they vary by sector and client size. Paying an invoice at 30 days is also common.

Splitting the fee into milestones

Tie each payment to something the client can check. Common splits are 30/70, 50/50 or 30/40/30:

• The first payment is due on signing or when work starts.
• Intermediate payments are due when the client approves a defined deliverable.
• The final payment is due on delivery or acceptance.

In the contract, define what counts as acceptance and set a payment deadline for each invoice, for example 30 days. Vague acceptance terms are the usual cause of late payment. Issue a separate invoice for each milestone.

Call it an anticipo, not a señal

The label in your contract matters. An anticipo is simply part payment of the price. If the contract is not carried out, it is refundable.

A señal or arras works differently. Unless the contract says otherwise, the party who gave it loses it by withdrawing. The party who received it must return it doubled if they withdraw. Arras that confirm the contract, or act as a penalty, must be agreed expressly and give no right to withdraw. A depósito is usually money held as a guarantee and returned at the end.

Courts look at what the parties meant, not the word used. So write plainly that the payment is an anticipo, part payment of the price.

IVA on advances

IVA is due when you receive an advance, so invoice the advance with IVA and make the final invoice cover only the balance. If your client is a business, the IVA from an advance goes into your return due by the 16th of the following month. This applies to mainland Spain. The Canary Islands, Ceuta and Melilla have different rules, so check with your adviser if you work there.

The timeline and documents below show the order of payments and the paperwork you need.

Timeline and deadlines

• Receive the first payment, the advance: on signing the contract or when work starts

• Receive each intermediate payment after the client approves a defined deliverable: on approval of that deliverable

• Receive the final payment: on delivery or acceptance of the finished work

• Set the payment deadline for each invoice in the contract: for example 30 days after the invoice

Documents you need

• A written contract signed by you and the client. It states that the advance is an anticipo (part payment of the price, refundable if the work is not performed), and sets the stages, the acceptance criteria for each deliverable and the payment deadline.

• A separate invoice from you for each milestone, issued to the client as each payment falls due.

Frequently asked questions

How much advance can I ask for as a freelancer in Spain?

Most freelancers in Spain ask for an advance of 20% to 50%, and 30% to 50% is common for projects. Larger clients may negotiate it down or prefer to pay on delivery. Ask for the advance early with new clients.

What is the difference between an advance and a señal or arras in a contract?

An advance (anticipo) is simply part payment of the price and is refundable if the contract is not performed, while a señal or arras is a sum given as a guarantee of the contract. Arras normally let either side withdraw: the giver loses them, and the receiver must return them doubled. Courts look at what both sides meant, so call the payment an anticipo in the contract.

Which payment splits are common for milestone projects?

Common splits for milestone projects in Spain are 30/70, 50/50 and 30/40/30. These are market habits, not legal rules, so you can agree any split with your client. Larger projects usually use more stages.