What is the IBI Tax in Spain? – Definition:
The ‘Impuesto sobre Bienes Inmuebles’ (‘IBI’, for short) is a local tax levied by the town hall where your property is located. It is paid once a year (normally due in August through to November) and applies to both resident and non-resident owners. In some parts of Spain it is known as SUMA.
- IBI Tax – Definition
- Valor catastral – Definition
- Why you should pay on time!
- Importance
- When is the IBI tax due?
- What happens if you don’t pay
This is Spain’s equivalent of the United Kingdom’s Council Tax. It varies from one town hall to the next. It is based on the rateable value of your property (0.4 – 1.1% of cadastral value per annum); for cheap properties (think rural land) it can be as low as a few euros whereas posh pads, in sought-after prime locations such as Marbella and Mallorca, command several thousand euros/year.
IBI tax (town hall rates in English)
Refuse collection (‘basura’ or ‘resíduos urbanos’ in Spanish )
Cadastral Value in Spain (‘Valor catastral’ in Spanish) – Definition:
Is the assessed value local Tax Authorities give to a property. It is usually well below the market value. This rateable value is used as the taxable base to calculate a series of taxes. You will find the cadastral value of your property in one of your local tax bills (i.e. IBI). Be aware that a storage room or parking may be regarded legally as a distinct separate entity from your main home and therefore subject to their own individual cadastral values. A cadastral value, in general terms, is 30 to 40% below the current market price of a property. So, it does not equate to a property’s true market value, it is actually well below it (which is good news).
Why you should pay the IBI Tax in Spain always on time!
Unbeknownst to most non-resident property owners, on buying property, you automatically become liable to pay the IBI Tax in Spain together with the rubbish fee on the following year. No one will give you the heads up on these taxes, so it is up to you to find out how much you owe and comply with the Spanish Tax Authorities.
IBI tax in Spain is of crucial importance because it has associated a valuation for tax purposes of your home known as ‘cadastral value’ (valor catastral, in Spanish) which is used as the benchmark to calculate any, and all, property-related taxes.
The IBI tax is important for you because:
- It is used as the benchmark to calculate all property-related taxes.
- On the IBI receipt you will find the cadastral value of your property
- On selling, a buyer’s lawyer will demand copies of IBI and rubbish tax invoices to prove a seller is up to date.
When is the IBI tax due?
Town halls are empowered to rule on this, so it varies. Normally, it is payable once a year, typically from August through to September.
Whoever owns the property on the 1st of January is liable to pay these taxes, by law.
What happens if you don’t pay?
- It may lead to your property being impounded and sold off in a public auction by local authorities. Spanish town halls, besieged by falling revenue, are becoming increasingly adept at pursuing aggressively this local tax post-credit-crunch; particularly for high-end property.
- It is not possible to file and pay NRIT and NRIIT taxes, as it requires for its calculation IBI tax. This in turn attracts fines, delay interests, and surcharges.
- On selling, a buyer’s lawyer will practice a huge retention to safeguard against any unpaid IBI tax.
- As a seller, you may forfeit the 3% sales proceeds tax rebate (plus legal interests). On selling, when a seller is non-resident in Spain, buyers must withhold 3% of the sales proceeds by law and pay it into the Spanish Tax Office. Non-resident sellers are entitled to a tax rebate on the 3% (subject to criteria).
Source: Larraín Nesbitt Abogados. Photo by Efraim Stochter.
