Buying a property in Spain is a wonderful experience. It means enjoying the sun, culture, gastronomy and an enviable quality of life. But, along with the advantages of being a property owner, there are also certain tax obligations that you should be aware of. One of the most important — and at the same time least understood — is IBI (Property Tax).
At MAM Solicitors, with over 30 years of experience in property and tax law, we know that this tax raises many questions, especially among foreign owners.
In this article, we explain clearly what IBI is, who must pay it, how it is calculated and what happens if you do not comply with it.
What is IBI?
IBI, or Property Tax, is a municipal tax that must be paid by all property owners in Spain, regardless of whether or not they reside in the country.
It is an annual tax that contributes to the maintenance of local public services. Thanks to the IBI, infrastructure and services such as street lighting, street maintenance, parks, schools and urban cleaning are financed. In some areas, this tax may be known as SUMA, depending on the body responsible for its management.
The IBI is collected directly by local councils, which means that there may be differences in payment terms and conditions between one municipality and another.
Who must pay it?
The IBI must be paid by the owner of the property on 1 January each year. This means that if you purchase a property in March, the bill for the current year will still be in the name of the previous owner. However, both parties can agree on how to split the payment in the purchase contract.
This tax is mandatory for all owners, even if the property is not their primary residence or if it is a second home, an investment or a holiday home.
Only certain properties are exempt from payment, such as public buildings, embassies, monuments declared to be of historical interest or properties belonging to non-profit organisations, such as the Red Cross.
Knowing who is responsible for payment and when the tax liability arises is essential to avoid confusion or unexpected debts after a sale.
How is the amount of IBI calculated?
The amount of IBI is determined based on the cadastral value of the property, a figure set by the Administration based on several factors. These include the surface area of the property and the land, the location, the services available in the area and the type of land on which it is built.
Based on this cadastral value, the local council applies a percentage or tax rate, which is usually between 0.4% and 1.3%, depending on the municipality. The result of applying this percentage to the cadastral value is the final amount that the owner must pay each year.
It is important to note that the cadastral value is not the market value. It is an administrative reference used by the State and local councils to calculate various taxes, including property tax, income tax and municipal capital gains tax.
When and how is IBI paid?
Each local council sets its own payment schedule, although the most common period is between the summer and autumn months.
The council sends a notification to the owner indicating the amount and the deadline for paying the bill. There are diverse ways to pay, such as directly at the counter of an authorised bank, through the local council’s website or by direct debit, which is usually the most convenient and secure option.
Many municipalities offer bonuses or discounts for advance or direct debit payments. It is also possible to find specific reductions for large families or for homes that have made energy improvements, such as the installation of solar panels.
Paying your IBI on time not only avoids surcharges but also ensures that you are up to date with your local tax obligations.
It is important to know that not paying your IBI can have financial and legal consequences. If payment is delayed, the council may apply surcharges of between 5% and 20%, depending on the time elapsed since the due date.
How can MAM Solicitors help you?
Buying a property in Spain is a fantastic opportunity and enjoying it to the full also means complying with your tax obligations correctly.
However, Spanish tax regulations can be complex, especially if you do not reside in Spain or are unfamiliar with the deadlines and administrative requirements.
At MAM Solicitors, we have been helping international clients to live in Spain with complete peace of mind for over 30 years.
Our team will check that there are no previous debts on the property, represent you before the local council or the Tax Agency, and manage the payment of IBI (property tax) and other local taxes on your behalf. We will also advise you if you receive administrative notifications or if you need to resolve any issues related to your property.
With offices in San Javier (Murcia), Orihuela Costa (Alicante) and Vera (Almería), our multilingual team is ready to assist you with everything you need.
Contact MAM Solicitors and let us help you enjoy your new home on the Mediterranean coast!
