The IBI tax is a property tax in Spain that you will have to pay the following year after buying a property in Spain. In most cases, you will not get a warning about paying the IBI property-related tax for the tax office. In this article, we discuss every aspect of the IBI tax in Spain.
What is the IBI tax?
The IBI tax or Impuesto sobre Bienes Inmuebles, is a property tax. The IBI tax is a tax paid to the local tax authorities, and it is a municipal fee for public services rendered by the local administration for houses, buildings and land. It is similar to the council tax in other countries.
How is the IBI tax calculated?
The cadastral value (taxable value) of the property or ‘valor catastral” in Spanish is the guidance for the IBI tax. This cadastral value is not linked with the property’s actual value and is only used for tax purposes by the local Spanish tax office. Registration of the cadastral value is in the Cadastral registry; this is a different registry than the land registry.
Characteristics that influence the cadastral value (rateable value) are the size of the plot, age, rooms, location, prices of surrounding properties, classification of land, number of storeys, etc. The cadastral value is a property valuation for tax purposes and it is always lower (around 10-30%) than the market value or purchase price.
The taxable value is multiplied by a percentage set by the local tax authority; this is generally between 0.4% to 1.1%. So when you have a property value of 500.000€, you will pay around 500.000€ * 0.04 = 2000€ in IBI tax. Calculate your IBI tax with this Suma tax calculator.
Depending on the local town hall, your IBI tax can have a percentage reduction when you pay earlier, in a specific way, have a family, solar panels, or other specified factors.
Where can I find the IBI tax when buying a property?
The Nota Simple can help you discover the IBI tax, it is used by property lawyers. The Nota Simple explains what you’re buying, as well as other debts of the property. If there are any annual or community charges, they will be listed here.
Updates of cadastral values
Your cadastral value is often recalculated every decade by the tax authorities to account for inflation changes. Sometimes the local government wants to increase the values of many properties in its local area.
When they have had permission from the national government, they can raise the property values by a percentage. For example, they might choose to increase the cadastral value’s of all the properties in an area by 10%.
IBI tax and unregistered properties
Not all Spanish properties are registered with local town halls; some may have been uninhabited for many years and have no registered owner. When a property is un-registered, the IBI payments still need to be paid.
New owners may have to pay the IBI tax for the period that these properties were unregistered when buying unregistered properties. Non-payment of the IBI taxes can result in fines, interest charges and forced sale of the property.
What happens when you pay the IBI tax late?
In recent years town halls have been more strict on late payments of IBI taxes. New ways to trace property owners have been introduced, and some town halls even hire property owner tracing agencies.
Late payment and unpaid IBI tax can be penalized by 5-20%, and you may also lose ownership or be forced to sell. Your bank account may also be frozen until a payment process is started. To not get any issues when IBI tax, contact an accountant in Spain to do your IBI taxes and avoid any other tax-related problems.
Who needs to pay the IBI tax?
All property owners need to pay the IBI tax when buying a house in Spain. So both non-resident property owners and resident owners need to pay this tax.
To avoid buying a property with local tax debts, the lawyer of the property buyers ensures that the previous owners pay IBI tax in the years they owned the property. When the previous owner did not pay IBI tax in the previous years, the debt is transferred to the new owner, and then the town hall will add additional taxes for the new owners.
For property buyers, it is essential to hire a lawyer who follows up on this for you before signing at the Notary office. They might advise on a safeguard in the initial buying contract; in the negotiation, the lawyer can state that the seller will forfeit a percentage of their sales proceeds when the seller did not pay IBI tax.
When do you have to pay the IBI tax?
While depending on the local town hall, the tax is typically paid once a year between August and November, and the tax is set beginning January. You can pay your IBI tax upfront, but paying the property-related tax at once annually is most common in Spain.
How do you pay IBI tax?
When you have registered your property with the local town hall, request how you will pay your IBI tax. The responsibility to pay the tax lies with the property owner, not the local town hall.
There are maybe different ways of paying at your local town hall, but most local town halls will work with a bank transfer or an online payment portal.
What does the local town hall do with your IBI tax?
The local council tax is spent on several regional services, including road infrastructure, street lighting, park and street cleaning, security, neighbourhood upkeep, rubbish collection etc. You can request information about how your IBI tax money is used at your Spanish town hall.
Where can you get further information?
Suppose you have questions related to property buying or require property buying assistance. Please do not hesitate to contact our team for any questions related to the buying process in Spain. Our property lawyers in Spain are bilingual and can answer all your questions regarding property-related taxes and anything real estate in Spain.