Upsticks Spain – What is IBI?

Those of you who already own a home in Spain will know the answer – IBI is the Spanish equivalent of Council Tax in the UK.

IBI stands for Impuesto Sobre Bienes Inmuebles (literally “tax on immovable goods” or real estate tax, also known as SUMA in some areas of Spain) and all property owners are liable to pay this tax every year.

Who pays IBI?
The owner of the property as listed on the Town Hall register. If you rent, then the landlord normally pays the IBI.

How is IBI calculated?
The amount of IBI you pay is based on the rateable value of your property (catastral value, valor catastral) as calculated by your local Town Hall, and is from 0.4% to 1.3% of this cadastral value per year. As a property owner, you will have been told the valor catastral during the purchase process.

What sort of amounts are we looking at?
A lot less than UK council tax, that’s for sure. The amount of IBI depends on the build size of the property, classification of the land it’s built on, the actual plot size and how close it is to local infrastructure and services. There are big differences, depending on whether the property is in a town or city with lots of local services or out in the middle of the “campo” (countryside). You could pay as little as €50 per year for a simple rural property, or up to €2000 or more a year for a luxury pad on prime urban real estate.

Will the IBI tax change?
Possibly – occasionally a Town Hall will do a review of the catastral values (in theory every 10 years, but doesn’t always happen) and you may find that the rateable value is increased, so you pay more IBI. It may go down as well of course. The ‘valor catastral’ may also increase if you make structural changes (add an extension, build a pool etc) and you could even be charged back taxes if home improvements have been made without informing the authorities correctly.

When is it payable? 
The IBI is normally paid once or twice a year, and most Town Hall’s send out written requests for payment. It makes sense to set up a direct debit (you may even get a discount on your bill for doing this) and you might be able to spread the payments too, as some Town Hall’s offer a fraction payment option.

IMPORTANT:  if you don’t receive a bill, that doesn’t mean you don’t have to pay – it’s up to the owner to pay the tax, regardless of whether you receive a bill or not, so make sure you know when yours is due and how to pay it.

Where and how do you pay IBI?
As with many things in Spain, where and how you pay your IBI bill depends on where you live. Some Town Halls send out their own bills which you can pay in person by card or direct debit, while other (larger) local authorities subcontract the issue and payment of IBI bills to third parties – like Patronato in Malaga province, and SUMA in the Alicante area. 

What happens if you don’t pay?

1. The Spanish Tax Office may issue general fines, surcharges etc on your whole tax liability.
2. The property could be sealed off and sold off at public auction.
3. If you try to sell the property with unpaid IBI, the purchaser can demand a huge “retención” (deduction from the purchase price) to cover the outstanding amounts and the retención can be a lot more than the actual unpaid IBI.
4. The bill won’t go away and will accrue surcharges, interest etc and you might end up with an embargo on your bank account (yes, in Spain, public administrations can take funds from your bank account to cover certain unpaid debts). 
5. You could end up on the Spanish bad debtors list – it’s hard enough to get any kind of credit line in Spain, so you really don’t want to be mentioned on the Spanish Tax Office naughty list – the Lista de Morosos

Can you reduce your IBI bill?
Yes, in certain circumstances, for example:

• Pay by direct debit
• Family discounts (depends on the number of children)
• Check If there are any municipal discounts – you have to ask for them
• Install solar panels – ask the Town Hall what the discounts are and for how long they apply
• Listed buildings are exempt
• If you rent your property, IBI payments are tax deductible

With the average Band D council tax bill in England currently standing at an eye-watering £1966, up from (£1898 in 2021), IBI is excellent value in comparison.

Good to Know

Where IBI differs from council tax – while some Town Hall’s include rubbish (basura) collection, street lighting etc in their IBI bills, others don’t and will charge for these services separately. Again, the amounts are really not huge – often less than €100 per year – but completely depend on the area you live and type of property. Landlords would expect renters to pay the rubbish collection and street lighting bill.

Community charges are extra – if you purchase a property on a residential development or complex (urbanización in Spanish) in addition to IBI, you may also have to pay community fees for the upkeep of common areas, swimming pools etc. These charges are normally paid monthly and can vary enormously depending on the property. Renters would expect their landlords to pay these fees, unless expressly stated otherwise in the rental contract.