What is the ‘empty property tax’ in Spain?

non-resident tax Spain IBI surcharge

With many homes in Spain standing vacant and access to affordable housing being a key social issue, the Spanish government introduced a new Housing Law (Ley de Vivienda) in May 2023.

The primary changes were intended to help renters, but one of the measures that encourages absent property owners to rent out their residences is the IBI surcharge. This allows local authorities to levy higher taxes on properties that have been left unoccupied for a long time.

Municipalities now have the power to impose financial penalties on owners of empty properties in Spain – so, depending on the number of properties and how long they have been unoccupied, international property owners could be looking at a much bigger tax bill than expected.

 

How much is the IBI surcharge?

All owners of property in Spain will be familiar with IBI (Impuesto sobre Bienes Inmuebles). This is an annual property tax paid to the local town hall, which is calculated based on the rateable value of the property (the cadastral value or valor catastral).

Each municipality can set their own rate, varying from 0.4%1.1% of the property’s cadastral value. Now, authorities can also impose surcharges of 50%–150% of this annual IBI bill if a property meets the conditions of the new Housing Law.

A property will be deemed ‘permanently unoccupied’ and liable for the surcharge if it has been unused ‘without justified cause’ for at least 2 years, and is one of 4 or more properties owned by the same individual or company.

Local authorities can charge up to 50% for such properties left vacant for 2 years, up to 100% for those remaining empty for 3 years, and up to 150% for each liable property if the owner has 2 or more in the same municipality.

This penalty will accrue on 31st December to be settled annually. Since IBI depends on an individual property’s cadastral value, the amount will vary, but those charged the maximum amount could see their tax bills more than double.

 

Who will be affected by this tax penalty?

If you own at least four properties in Spain and some of them have been unoccupied for a while, then you could fall victim to this surcharge from May 2023 – especially if at least two of your empty properties are in the same area.

However, if these conditions don’t apply to you, then there isn’t much cause for concern. You are not likely to be affected by the IBI surcharge if you own one or two homes in Spain that you regularly visit for holidays at least once a year.

Even if you own a property that has been vacant for 2–3 years or more, it could still be exempt as a:

  • ⦿ Second residence (with a maximum vacancy of 4 years)
  • ⦿ Property for sale (on the market for up to 1 year)
  • ⦿ Property for rent (rented for a minimum of 6 months)
  • ⦿ Subject of construction or rehabilitation action
  • ⦿ Subject of litigation pending resolution

Other accepted circumstances that may make effective occupation of the property impossible include temporary transfers for work, training, or studying, and changes of address due to dependency for health or social reasons.

Holiday home owners in Spain only need to visit at least once every 2 years to avoid incurring this penalty, but the state government and autonomous communities encourage those with properties they aren’t using to rent them out.

The Housing Law also introduced a range of tax reliefs for landlords to incentivise owners to put their empty properties on the rental market in areas with a shortage, with tax reductions of up to 50%–90% available on income from rental agreements in particular circumstances.

 

Stay on top of non-resident tax in Spain

If you own several properties in Spain and your primary real estate interests are in this country, or your financial dependents live in Spain full-time (e.g. your spouse or children), then you could be considered a tax resident and charged at the same progressive tax rates as Spanish residents.

However, if this doesn’t apply and you spend less than 183 days a year in Spain, you are likely to be considered a non-tax resident in Spain and charged a higher flat rate, depending on whether you are an EU national or not.

If you are a non-resident, but earn income from renting out your property in Spain when you aren’t using it, you would still have to file Income Tax returns in Spain and make sure to pay IBI.

Fortunately, if you need help with non-resident tax in Spain, whether it’s property tax or rental income tax, you can always get in touch with Manzanares Abogados for advice.

Our Spanish and English-speaking lawyers offer tax assistance in Andalucía and Ibiza – so call one of our offices or email us at clientservices@manzanareslawyers.com to find out how we can help you.

 

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