IBI – local property taxes in Ibiza

When you own a property in Ibiza, you must pay local property taxes, called IBI.

IBI (local rates) is a municipal tax which has to be paid every year by owners of homes, premises, garages or plots, i.e, any urban property or buildings and also by owners of agricultural land or buildings. The amount of your yearly payment is determined by the value assigned to your property by the administration – known as Valor Catastral (rateable value). The rateable value of your property is calculated on the value of both the land on which your property is built and the building itself. The tax rate which has been approved by each Town Council – and which is the same for all properties within the municipality – will be applied to this rateable value.

How does your property become liable for tax?

Whenever you purchase a home, you are obliged to apply for the property to be registered. The official application form is known as Modelo 902 and you can obtain it from your local tax office. The buyer of a property is the person obliged to declare the property for registration.

When you pay the IBI on your property for the first time, you will be billed by mail and the following years it shall be possible to have it done by direct debit through your bank.

How to register your property.

When you buy a property in Spain, you have an obligation to register it for tax purposes. (Please do not confuse this with the registration for legal purposes in the Property Register).  The registration can be done in the town hall or in the tax collecting offices. The application for registration will be sent to the Cataster Office (meaning the “Catastro” office you will find in each of the provincial capitals), since they are the ones responsible for making the registration and the assessment on the value of the property, that will later appear in your bill for local rates (IBI).

If the property that you have bought has not been registered for tax purposes, or if you have built a house on a registered plot, or if you have made additions/extensions to a registered building, the documents that should be submitted when applying for a property to be registered are the following:

• A 20 x 15 cm photograph of the front of the building.
• A plan showing the situation of the property (you can get such a plan in the town hall).
• Plan of the building plot.
• Plans of each floor of the house.
• ‘Certificado de fin de obra (Certificate of termination of the work) from the architect and the “Cedula de Habitabilidad” (Habitation Certificate).

On the application form will be some space for technical information on the dwelling.

If property is already registered.

If you buy a second-hand property and the previous owner can give you receipts for the local rates (IBI), you know that the property has already been registered. Your obligation then is to declare yourself as the new owner. This is done in the town halls or the SUMA offices, which will then send the application on to the “Catastro” for registration.

You will be asked to produce:

• Photocopies of your title deed (escrituras).
• The last receipt for local rates (IBI) for the property.

You will be given a copy of the application that you fill in and sign. The change in name will not appear on the tax bill before the next tax period.

Do remember that the law establishes certain time limits for this registration. For changes in ownership of a property, the time limit is two (2) months after signing the escritura. For registration of new buildings or renovations, it is also two (2) months from signing the “escritura de obra nueva” (deed for the building).

There are now fines for not complying with the obligations mentioned above, ranging from 6 to 900 Euro.

Voluntary payment period

The voluntary period for payment of IBI and other local taxes can vary in each municipality. You find out the dates in your local tax collection office.

If you have arranged for your bank to direct debit these payments, you just wait for the receipt from the bank. If you have not made such an arrangement, you will get a bill for the taxes to be paid and must then go to one of the banks mentioned on the reverse side of the bill to pay. Or you can pay by way of one of the Cajeros Automaticos if you have such a card, just entering the reference number in the upper part of the bill with 13 digits. Or you can pay directly in your local tax collection office with certain credit cards.

Payments made after the voluntary period will be surcharged at the rate of 20%, plus interest on the delay.

Capital gains tax

Looking ahead, when you eventually come to sell your Spanish property capital gains tax will be due on the gain, at 19% on the first €6,000 and 21% on the balance. Spanish residents will have to add in other gains and investment income when calculating the tax due.

For Spanish residents, gains on disposal of the main home are exempt where you have lived in the property for at least three years and you are:

1.Over the age of 65; or
2.The full proceeds of sale (i.e. the selling price) are reinvested in a new main home within a certain period.

There is also a local tax known as the “Plusvalia” and raised in urban areas on the growth in the value of land, and which is allowed as a cost of disposal in calculating the mainstream capital gains tax.

For EU residents, the gain would be taxable in the home country, but under the terms of the double tax treaty, any tax paid in Spain by EU residents can be credited against the tax due in the home country.

Taxes on death

If you die owning the property, or gift it during your lifetime, Spanish succession tax will apply, regardless of your residence position. If non-resident in Spain or you have lived here for less than five years as a declared resident, the State rules will apply, and these are not generous – spouses and children are entitled to a deduction of just under €16,000 per beneficiary, and pay tax at progressive rates from 7.65% to 34% on the excess. Taxes are much higher for unrelated individuals, such as unmarried partners or stepchildren.

If Spanish resident, each Autonomous Region can set its own rates and exemptions, and in some Regions, succession tax has been significantly reduced, whilst in others, it is still significant.

Taking advice from someone who understands the Spanish implications can help you mitigate taxes.

Spanish SL Companies

Generally a client who has structured the ownership of their property, using a Spanish SL, will have done so as they have been lead to believe that this method will protect them against Inheritance Tax in Spain. This is not so, as in Spain, it is the beneficiaries who have to pay the Taxes on death and not the deceased’s Estate. This means that whether the non Spanish domiciled beneficiaries are inheriting the shares and assets of the SL Company, or the property directly, then Inheritance Tax will still have to be paid in Spain.