Recurring billing: Definition and benefits for Spanish businesses

Billing
Billing

Stripe Billing lets you bill and manage customers however you want—from simple recurring billing to usage-based billing and sales-negotiated contracts.

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  1. Introduction
  2. What is recurring billing?
  3. What are the benefits of recurring billing?
    1. Advantages for businesses
    2. Advantages for customers
  4. How to implement recurring billing in Spain
  5. Legal and tax obligations of recurring billing
  6. FAQ on recurring billing in Spain
    1. What actions should a business take if a customer makes changes during a recurring billing cycle?
    2. Is it necessary to renew the SEPA mandate for every recurring billing cycle?

The Bank of Spain reports that Single Euro Payments Area (SEPA) Direct Debits made up almost 13% of all cashless payments in Spain during the first half of 2024. Compared to the same period of the previous year, the volume of these payments rose by 2.6%, totaling more than 1 billion transactions valued at €338 billion.

The rise of this payment method aligns with the growth of subscriptions and demand for recurring billing systems in Spain. A report on online shopping in Spain from the National Observatory of Technology and Society (ONTSI) shows that over half of people in Spain have at least one online subscription, including over 66% of those under 25.

If your business provides products or services with recurring payments, using a recurring billing solution can save time, reduce manual errors, and ensure payments are collected on schedule.

What’s in this article?

  • What is recurring billing?
  • What are the benefits of recurring billing?
  • How to implement recurring billing in Spain
  • Legal and tax obligations of recurring billing
  • FAQ on recurring billing in Spain

What is recurring billing?

Also known as periodic billing, recurring billing is a system that creates regular payment requests and invoices. Depending on the business’s pricing model, the timing of charges can be based on two factors:

  • Set time period: The business collects payment and issues an invoice after the agreed billing cycle ends (e.g., monthly, quarterly, or yearly).

  • Usage limit: In some usage-based billing models, customers are charged once they hit a set usage amount. For example, a cloud service might bill customers once their usage reaches €1,000—whether that happens after a month or just days after the last payment.

To manage recurring billing, many businesses use billing software that automatically gathers the required data—such as contracted plans or service terms—and processes payments on a set schedule.

With traditional systems, collection and invoicing are separate processes. For instance, if a business sets up SEPA debits through its bank using bank drafts to automate customer payments, the business will need to create invoices manually. This is because the bank can’t access the business’s invoicing system.

Today, there are tools such as Stripe Billing that let you automate and sync invoice creation with the payment collection process. Combining these processes means invoices can be sent right after payment is confirmed, which helps cut down on manual errors and boosts financial management. Also, if a customer switches plans in the middle of a billing cycle, Billing automatically adjusts the amount owed and applies the correct, prorated charge.

Recurring billing is widely used by companies that sell online services in Spain, such as streaming platforms or software-as-a-service (SaaS) providers. This billing method is also a good way to let customers pay in installments based on a personalized agreement.

What are the benefits of recurring billing?

Setting up a recurring billing system in businesses with recurring revenue models provides advantages for both companies and their customers.

Advantages for businesses

Advantages for customers

  • Increased convenience: Automatic payments mean customers are less likely to miss payment due dates. This can help prevent service interruptions.

  • Time savings: Choosing automated payments could save customers time by eliminating the repetitive, tedious task of manually making payments.

  • Lower prices: Many companies offer discounts to loyal customers on long-term subscriptions. For example, an annual SaaS subscription might cost the equivalent of 10 monthly payments, even though it covers 12 months of service.

How to implement recurring billing in Spain

To benefit from the advantages mentioned earlier, you need to understand how to set up and manage recurring invoices. Here are the basic steps:

  • Select subscriptions: Specify the products or services that will be billed regularly.

  • Set the pricing model: Decide which pricing model you will use. For example, you might choose fixed fees, usage-based pricing, charges based on the number of users, or tiered pricing, which is common in SaaS.

  • Configure payment options: Your customers will be charged automatically using the payment methods you decide to accept. For example, Spanish businesses process 77.5% of recurring payments through direct debits.

  • Automate invoicing: With traditional systems, invoicing is separate from payment collection, though some invoicing software might let you automate this process. If you use a solution that combines payments and billing—such as Stripe Billing—you can sync both processes for every billing cycle.

No matter which tool you use for recurring billing, it must comply with current Spanish regulations. Here are the key legal and tax obligations you need to know:

  • Ensure software compliance: The application you use to automatically create invoices and handle collections must follow Royal Decree 1007/2023, the anti-fraud law, and the Create and Grow Law. One requirement is that the application must record the payment at the exact time it’s processed.

  • Follow direct debit rules: If you accept direct debits, customers need to sign a SEPA mandate, as required by EU Regulation 260/2012 for euro direct debits.

  • Honor the right of withdrawal: Customers can use their right of withdrawal to cancel contracts. For digital services or subscriptions, you can disable access when the customer cancels.

FAQ on recurring billing in Spain

What actions should a business take if a customer makes changes during a recurring billing cycle?

If a customer switches plans, cancels, or changes contract terms midcycle, prorated billing is the best approach. This way, the charge reflects the actual service usage during that time.

Is it necessary to renew the SEPA mandate for every recurring billing cycle?

The SEPA mandate only has to be signed once at the start of the contract, so it doesn’t need to be renewed with each billing cycle. The business must store it electronically for the duration specified in the contract in case proof of authorization is needed.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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