Unfamiliar to most non-resident property owners is the fact that once you purchase a property in Spain, you inevitably become subjected to the IBI tax the following year. 

Usually, whether or not you are aware of such a tax, you are required to check out what you’re owing and abide by the rules. The Spanish legislation presumes that you should know before purchasing a property in Spain. 

To accomplish this, you will need the following information.  

What is IBI Tax?

  • IBI stands for “Impuesto sobre Bienes Inmuebles”, literally translated as “property tax”. 
  • It is a municipally levied tax on properties and differs broadly from one municipality to the other.  
  •  It is known as SUMA in other parts of Spain and is the equivalent of the United Kingdom’s tax.
  • The IBI tax applies to both residents and non-residents property owners. 
  •  Every property proprietor is obliged to pay the IBI tax once yearly. 
  • The amount to be paid varies largely on the size of the property, classification of land on which the property is positioned, proximity to services and infrastructure and from town to town (you may, for instance, pay as small as 50 euros annually for a property in a rural area). 

Significance of the IBI tax

IBI tax is of vital value and non-payment will lead to dreadful outcomes. Some importance are highlighted below;   

  • IBI tax is utilised as the benchmark to determine any property-related taxes. it has a relevant value for tax plans of your residence known as ‘cadastral value’- used as the benchmark to determine all, property-related taxes.  
  • Upon marketing, your customer’s lawyer will require copies of the IBI receipts for the past four years.

How is the IBI tax calculated?

  • IBI estimates are nearly comparable to the British council tax band system. It is calculated according to the rateable value (valor cadastral). The valor catastral of your property is defined on the bases of size, condition, location, title, cost of improvement, building cost of the property. 
  • Using the above information, the local authority will arrange a report and a valuer will estimate what the rateable value is. 
  • The cost is then registered at the Catastral Registry-central record agency at your local town hall. 
  •   You can check for the cost of your valor castral (which is approximately 60-70% of the actual value of your property) in your IBI payment receipt from online banking. The value can be modified legitimately to permit appreciation or depreciation once every 8years. 
  • The IBI is assessed based on a coefficient (which varies between 0.4% and 1.3%) times the “valor cadastral”.

 Outcomes of non-payment

  • Failure to pay the IBI tax may result in the impoundment and public auctioning of your property.  
  • Also, without a copy of the IBI tax invoice, it will be practically impossible to file and pay non-resident income tax resulting in penalties, delay interests as well as overcharges. 
  • Moreover, when selling your property, the customer’s lawyer will exercise huge retention to secure against any overdue IBI tax on the preceding four years.
  • Summarily, non-payment of IBI tax- is the craziest and quickest means to lose possession of your property in Spain. Therefore, in case you have not been paying this local tax, it is important to contact the services as soon as possible to fix things.  

 When is the IBI tax due?

  • It depends entirely on the town halls running the tax payment. 
  • As initially stated, it is due once a year. With the Spanish legislation, anyone (resident or non-resident) who owns a property as of January 1st is accountable to this tax (generally due in August through to November).

How to pay the IBI tax

  • Most town halls communicate out drafted requests for IBI payments. Such documents describe how to pay, the place as well as the date on which payment is expected. 
  • However, some town halls encourage prompt payments by offering discounts but all town halls attach surtaxes for late payment. Because this tax is paid annually, it is safer to set up a standing order to dodge superfluous surtaxes for late compliance.
  • Notwithstanding, whether or not you receive a request from your town hall, it is legally the responsibility of the property owner to pay his/her IBI tax on time every year. 

Conclusion

 To conclude; 

  • It is essential to completely understand your tax and payment responsibilities when purchasing a property in Spain. 
  • If you own a property, you should pay IBI, whatever the situation. 
  • The funds paid are used for the maintenance of the local community (where your property is located), and to finance local services.
  • A noble lawyer will point out everything about IBI to you before you venture out to buy a property in Spain while a good accountant will make sure you pay your IBI dues on time. 
  • In case you have any doubts on IBI tax, talk to your local town hall, assist them by paying your taxes and avoid surtaxes by paying on time. 

 

 

 

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