What is IBI Tax?

01 March 2020

By Martha L.
Director of Alanda Properties

Unbeknownst to most non-resident property owners, on buying property in Spain, you automatically become liable to pay IBI and basura tax on the following year. No one will give you the heads up on this tax, so it is up to you to find out how much you owe and comply with the Tax Authorities.

IBI tax 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 all your property-related taxes.

IBI Tax – Definition

This 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). 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 Sotogrande, it commands several thousand euros/year.

Importance

  • IBI tax is used as the benchmark to calculate any and all property-related taxes.
  • On selling, a buyer’s lawyer will demand copies of the IBI invoices for the previous 4 years.

When is it 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 this tax, by Law.

Consequences of not paying IBI tax

  • Non-payment leads to your property being impounded by local Authorities and sold off in a public auction.
  • It is not possible to file and pay NRIT and NRIIT taxes (non-resident 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). If you are not up to date with IBI, you may forfeit your tax rebate.

 

At Alanda Properties, we can assist you by registering you with your local town hall, so these local tax rates are paid by direct debit going forward. We can also assist you by paying any arrears you may have.  Talk to us, we are happy to assist you.

Speak to specialists, speak to Alanda Properties.

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