It is important to fully understand your tax and payment obligations when buying property in Spain. A good lawyer will explain all this to you before you commit to purchasing a property. A good accountant/gestor will ensure you pay your dues on time, in order to avoid any unexpected hefty fines! There are different obligations for residents and non-residents.
In this article, we are going to look at IBI tax.
Be aware that the property tax paid via the Non-Resident Tax Return form (Modelo 210) should not be confused with the IBI tax in Spain.
Many expats often confuse these two taxes and are hit with hefty fines for non-payment.
So, what is the IBI tax? How is it calculated?
IBI is an abbreviation of “Impuesto sobre Bienes Inmuebles”, literally translated as “property tax”. However, it is better explained as the Spanish equivalent of the old UK-style “council tax” that is paid every year to your local town hall.
The amount of tax to be paid generally depends on:
- the build size of the property
- the classification of the land the property is built on
- the size of the plot
- the proximity to services and infrastructure
Based on the above factors, the local town hall (ayuntamiento) will assign a “valor cadastral” (taxable value), to each property in its area.
As a guideline, the “valor cadastral” will probably be about 60 to 70% of the actual value of your property. These values can legally be adjusted every eight years, to allow for appreciation and depreciation.
The IBI is then calculated based on a coefficient multiplied by the “valor cadastral”.
The coefficient applied varies between 0.4% and 1.3% for urban properties. There are significant differences between municipalities, depending for example on whether it is a provincial capital or the level of public services provided by that particular council.
When purchasing a property, it is essential to request a copy of IBI payments (Your assigned lawyer should do this!). On the IBI receipt, you can also clearly see the “valor cadastral” of the property.
If you have a “firma digital” you can request more details about your property here: https://www.sedecatastro.gob.es/ (Change into English by selecting “welcome” at the top right-hand side of the page)
Who pays IBI tax and why?
Basically, if you own a property, whatever the condition, you should pay IBI.
The monies paid go towards the upkeep of your local community, infrastructure and services.
The exceptions to the rule are properties:
- owned by the state, autonomous communities or local entities directly related to public safety or educational services (police stations, prisons or schools)
- that are state-owned or dedicated to national defence
- belonging to the red cross
- belonging to the Embassies of other countries
- catalogued as historical heritage
- recognised as old buildings of major cities or those belonging to legally recognised non-Catholic religious associations
Too many expat properties have been previously unregistered with local town halls as they are uninhabited and even abandoned. This does not mean that the IBI tax need not be paid. Hefty fines will be incurred. Repossession may ensue.
In the past, many owners got away with being negligent, usually through ignorance to the existence of their obligations to pay. This is no longer the case. The town halls have new ways to locate property owners, whichever country they may be in, and demand payment for outstanding tax bills plus their surcharges for late payment.
How do you pay IBI tax?
Most town halls send out written requests for IBI payments. The letters explain how, where and by what date the payments must be made.
Some town halls offer discounts for prompt payment.
All town halls add surcharges for late payment.
As this tax is payable on an annual basis, it is a good idea to set up a standing order to avoid any unnecessary surcharges for late payment.
It is important to note that whether or not you receive a payment request from your town hall, legally the responsibility lies with the property owner to pay the tax on time, each year.
If you are uncertain about your IBI tax, speak to your local town hall. Support them by paying your dues and don’t get caught out by late payment.