When buying property or earning income in any country, it’s vital to know about tax liabilities, whether you’re counted as a tax resident in that country or not.
When it comes to municipal property taxes in Spain, the local authorities won’t necessarily notify you personally of your obligations in advance, but if you miss their tax deadlines, they could still fine you for non-compliance.
Many non-resident property owners find themselves tripped up by not knowing about IBI, as they aren’t occupying their property in Spain for most of the year. However, it’s the registered owner’s responsibility to know which taxes are due on the property and to pay them on time each year.
How much property tax in Spain you’ll owe depends on the region and the property’s taxable value – read on to learn how IBI works, and when and how these payments are due.
What is IBI in Spain?
IBI or Impuesto sobre Bienes Inmuebles is a real estate tax on property in Spain, which all property owners must pay. In some parts of the country, it may be known as SUMA, named after the agency that collects the tax in those provinces.
As a municipal tax, it is usually levied by the local town hall rather than the state, so IBI rates can vary from one municipality to the next. Like council tax in the UK, the local authorities use the money raised from this tax to pay for public services, such as maintaining roads, parks, street lighting, and sometimes rubbish collection, as well as funding education and healthcare.
IBI is also important because it provides a valuation of your property (known as valor catastral or cadastral value), which is then used as a benchmark for calculating all property-related taxes. This is why property buyers should always check the cadastral value before purchasing real estate.
How is IBI calculated?
While IBI is charged as a percentage, the tax bill depends on the property’s cadastral value. This rateable value, in turn, is determined by a number of factors, which include the property’s:
- ⦿ Size and location
- ⦿ Construction costs
- ⦿ Title and lease details
- ⦿ Age and condition
- ⦿ Land characteristics
- ⦿ Proximity to public infrastructure
Using this information, the local town hall compiles a report assessing the property’s rateable value and assigning a taxable valor catastral to each property in their area. These records are kept by the cadastral registry (which is different from the land registry office).
The cadastral value is usually 30–40% lower than the property’s actual market value, and may be adjusted every 8–10 years to take appreciation or depreciation into account. The municipal IBI rate is applied to this figure each year to calculate the annual property tax bill.
This rate varies according to the region the property is located in and the level of public services that the local authority provides, but it’s usually between 0.4–1.3%. Some municipalities offer an IBI reduction for early payments, environmentally friendly improvements like solar panels, or family homes with 3 or more children.
Who has to pay IBI in Spain?
All property owners in Spain are liable for paying IBI annually on their properties, regardless of the property’s condition and whether it is in use or not. The only exceptions are properties owned by the state, local authorities, embassies, or the Red Cross, and legally recognised historical buildings.
This means that both Spanish residents and non-residents who own property in Spain must pay IBI. So, if you are a property owner who lives in Spain for less than half of the year (183 days), be sure to look into your liabilities for non-resident tax in Spain thoroughly.
Whoever owns the property at the start of the tax year will be responsible for paying IBI for that year. If you rent your home, the landlord would normally pay this tax, but if you are the homeowner and registered as such with the town hall, then you must pay it yourself.
For this reason, it’s essential to check that previous owners have paid this tax properly before buying a property, as you will become responsible for the seller’s IBI debt if they didn’t – plus picking up the tab for any fines or penalties they may have received for this.
When do you pay IBI in Spain?
It may vary depending on the town hall, but IBI is set at the beginning of the tax year on 1st January and normally paid between summer and winter. This can be done in one annual payment, or split into two payments, with the first instalment typically due in June and the second in November.
Most town halls will send out a letter requesting payment, which will explain in writing how much is due, the deadline for payment, and where and how you can pay your IBI bill. Even if you don’t receive one, you’re still responsible for paying the tax for your property, so you should take the initiative to check with your town hall yourself.
Payment options include paying in person at the town hall or bank, paying online through the town hall’s official website, or setting up a Direct Debit to split the outstanding tax into smaller payments. Some town halls offering this option may also offer a small discount on bills paid this way, such as 5%, to encourage property owners to be proactive about paying IBI.
What happens if you don’t pay IBI?
If you fail to pay your annual IBI bill, the local authority could charge a penalty fee for late payment. This can range from 5%–20%, depending on how long the payment has been overdue for. If you continue to not pay, these fines will keep accruing – the more serious it gets, the higher the risk of the local authority freezing your bank account or seizing your property.
Many owners of second homes in Spain may not be aware that they need to pay this tax, but town halls are cracking down on this kind of negligence by pursuing property owners in their area with outstanding tax bills and surcharges for missing payment deadlines.
Sometimes, local authorities won’t actively pursue a property owner for missing a payment, but will keep this on record. Then, if you try to take out a loan or want to sell your property, the IBI debt will come to light. This could lead to outright rejection until the debt is paid, or a deduction in your sale price to cover it (which can often be even higher than the debt).
To avoid fines, penalties, and potential repossession of your property in Spain, you should stay on top of your IBI responsibilities, and check with your town hall if you have any questions or concerns. As most local offices only conduct business in Spanish, you may need a translator or Spanish-speaking representative to help you if you aren’t fluent.
Get help with your IBI tax bill
It’s important to stay aware of your IBI liability, which could change from year to year. Town halls may review local cadastral values once a decade or so, which could result in your property’s taxable value rising or falling, therefore increasing or decreasing your IBI bill.
Additionally, if you make any structural changes to your property – such as adding an extension or building a swimming pool – you must inform your town hall so they can re-assess the property’s rateable value. Failure to do so could result in backdated charges.
As you can’t always rely on the local authority informing you of taxes due, you must keep track of IBI payments every year as the property owner. For non-residents who live outside of Spain most of the year, assigning power of attorney to a representative in Spain can help to make sure that all taxes are filed and paid on time.
At Manzanares Lawyers, we help property owners in Andalucía to manage taxes in Spain, including IBI. If you need our assistance, email your enquiry to email@example.com, or call our office in Marbella or Alhaurin.