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.
Cadastral Value - Definition
Is the assessed value local Tax Authorities give to a property. It is usually well below the market value. This rateable value is used as the taxable base to calculate a series of taxes. You will find the cadastral value of your property in one of your local tax bills (i.e. IBI). Be aware that a store room or garage space may be regarded legally as a distinct separate entity from your main home and therefore subject to their own individual cadastral values. A cadastral value, in general terms, is 30 to 40% below the current market price of a property. So it does not equate to a property's true market value, it is actually well below it (which is good news).
When is it due?
Sample IBI tax invoice
Just follow the link supplied: sample IBI invoice
Consequences of not paying IBI tax
Real case: Mr Daniel David Brockman, a prominent New York-based US tax lawyer and patron of the Arts, lost the property of a huge residential area in Marbella he was going to develop known as Urbanización Sierra Blanca because he failed to pay IBI tax to Marbella’s town hall. This estate is currently valued at over a billion dollars.
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.
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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.
“What the Arab world needs most is free expression.” – Jamal Khashoggi
Jamal Ahmad Khashoggi (1958 – 2018). Was a Saudi journalist, writer and the former general manager and editor-in-chief of Al-Arab News Channel. He was also a Washington Post Global Opinions contributing columnist and served as editor for Saudi newspaper Al Watan. An outspoken critic of his country’s iron-ruling family, he bravely did not shy away from bringing to public light serious matters and staunchly defended the civil rights of his countrymen, specifically the freedom of speech. About to marry his fiancée, he was brutally butchered inside the Saudi consulate complex in Istanbul, Turkey, by a state-sponsored death squad at the behest of the highest level. You can read his last column here.
Article also published at Spanish Property Insight: IBI Tax Explained.
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