IBI Tax Explained
Raymundo Larraín Nesbitt, October, 31. 2018
Marbella-based lawyer Raymond Nesbitt explains the importance of IBI tax and the consequences of non-payment.
Article copyrighted © 2018. Plagiarism will be criminally prosecuted.
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of November 2018
With the ongoing off-plan property boom firmly underway, I thought it would be a good idea to write a gentle reminder for new-build owners on their duty to pay this local tax on the following year from buying a house.
Unbeknownst to most non-resident property owners, on buying property in Spain, you automatically become liable to pay IBI 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
The Impuesto sobre Bienes Inmuebles (IBI, for short) is a tax that applies to both residents and non-residents. In some parts of Spain, it is known as SUMA. All property owners must pay this tax every year.
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, command several thousand euros/year.
- IBI tax is used as the benchmark to calculate 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.
Sample IBI tax invoice
Just follow the link supplied: sample IBI invoice
Consequences of not paying IBI tax
- It may lead to your property being impounded and sold off in a public auction. Spanish town halls, besieged by dropping 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).
Non-payment of IBI tax is the daftest fastest way to lose ownership of your Spanish property.
If you haven’t been paying this local tax, you should contact Larraín Nesbitt Lawyers ASAP to get it sorted out.
We offer the most competitive fees in the market. We file taxes all over Spain.
Setting up IBI tax: from only €200
We are specialized in taxation
Larraín Nesbitt Lawyers, small on fees, big on service.
Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance, and litigation. You can contact us by e-mail at email@example.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.
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Article also published at Spanish Property Insight: IBI Tax Explained.
Legal & Tax services Larraín Nesbitt Lawyers can offer you
- Conveyancing – Buying
- Conveyancing – Selling
- Non-Resident Income Tax (Fiscal Representation) from €90/year
- Holiday Rentals Accounting Service (HRAS) from €100
- Taxes on Selling Spanish Property – 8th December 2014
- Taxes on Buying Spanish Property – 8th July 2015
- Non-Resident Taxes in Spain – 8th December 2015
- Spain’s Non-Dom Tax Scheme – 8th July 2016
- Renting in Spain - Landlord´s Taxation – 8th of January 2017
- Holiday Home Taxation in Spain – 8th of July 2017
- Non-Resident Income Tax – 8th December 2017
- Tax advantages on becoming resident in Spain – 8th March 2018
- Holiday Rental Taxation in Spain – 8th July 2018
- Holiday lettings: with or without VAT? – 21st June 2018
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