IBI Tax Explained

Marbella-based lawyer Raymond Nesbitt explains the importance of IBI tax and the consequences of non-payment.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of November 2018

Introduction

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.

Importance

  • 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 IBI tax non-payment

  • 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).

Conclusion

Non-payment of IBI tax is the daftest 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 info@larrainnesbitt.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 originally published at Larraín Nesbitt Lawyers: IBI Tax Explained.

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About Raymundo Larraín Nesbitt

After completing his dual law degree in Madrid (ICADE) in 2003 Raymundo went on to work for prestigious Spanish and English law firms in Spain before moving to the UK for several years to work for a British multinational. He is a prolific writer of legal & financial articles in English, with well over 140 articles published and widely used in the Spanish real estate sector. Raymundo now runs his own law practice in Marbella, where he advises local and foreign clients on all legal matters with a focus on conveyancing and non-resident taxation. He is regularly quoted by the international press as a reliable source in his field of expertise.