What is IBI?
IBI stands for Impuesto sobre bienes inmuebles, which means tax on real estate. It is a tax levied on all owners of real estate, whether in urban or rural areas (including apartment, houses, shops, car parks, etc.). The real estate tax is collected annually by the local municipality, so the rate and timing of the tax vary from place to place. It is an important source of revenue for the local treasury.
Who must pay the IBI?
According to the Spanish Local Finance Act, the tax on real estate is paid by its owner. In other words, whoever’s name is written on the property deed should pay it. If the property is owned by more than one party, each party will only have to pay its own share.
Sale of the property, who will pay the IBI of that year?
The Spanish Local Finance Act specifies that the real estate tax is payable by whoever is the owner of the property on 1 January of each year.
If a owner sells he house on 2 January 2023, even though in 2023 he will have owned it for two days, the tax for the whole year 2023 will also be his/her responsibility. The new homeowner (buyer) will only start paying it from 2024.
Nevertheless, it is common that the buyer and seller agree in the contract to split the payment. Regardless who actually pays the tax, the law states that the tax should be levied to whom is the owner on 1 January each year.
Who pays the IBI when a property is rented out?
By default, is the landlord who pays. This means that if there is no explicit contract between the landlord and the tenant, the IBI will still be paid by the landlord.
What if the contract states that the tenant will pay? Even though the contract states that the tenant pays it, the government will only collect it from the landlord and never from the tenant, although the landlord has the right to claim the amount paid to the tenant.
How to pay the IBI?
As the IBI is a local tax, the date of payment varies from place to place, usually for the second half of the year. In the city of Madrid, for example, the property tax is usually paid between October and November. Normally, the municipality will send a letter to your address, but if it does not arrive you must go to the tax office of the municipality and ask for the tax bill yourself. If you miss the payment, you will face a penalty, so it is important to be aware of this.
