If you are thinking of buying a new home in Malaga or on the Costa del Sol, understanding all the taxes involved is key to planning your investment well. One of the most important taxes you need to know about is the IBI, the abbreviation of One of the most important taxes you need to know about is the IBI, the Spanish abbreviation of "Impuesto sobre Bienes Inmuebles", a local tax that must be paid by those who own and occupy a house or other property.
In this article, we will tell you everything you need to know about the IBI of a house so that you are well-informed and can invest intelligently. From how the tax is calculated to who has to pay it when you sell. Read on!
What is IBI and how does it affect your property investment?
If you own a property in Spain, whether it is a house, a garage or a business, you will have to pay IBI (Property Tax). This local tax is levied once a year and is one of the main sources of income for local councils. Although each municipality sets its own terms of payment, the IBI is compulsory for all property owners, regardless of nationality.
The property tax is mainly regulated in articles 60-77 of the Royal Decree Law of the Local Treasury 2/2004 of 5 March.
How is the IBI calculated?
The amount paid for the IBI of a house depends on the cadastral value of the property. This cadastral value is determined by the General Directorate of Cadastre and is an official estimate of the price of the property, calculated based on factors such as location, type of soil, age of the building and construction costs, regardless of whether or not you have a mortgage or what you paid for the property. Based on this value, the council where the property is located applies a percentage to determine how much you will have to pay.
Each council has the flexibility to adjust this percentage within the limits set by the Treasury, so the final amount of the IBI may vary depending on the locality. In addition, the percentages used to calculate a property's IBI may vary depending on whether the property is located in a built-up area, a rural area or has special features.
For example, in the municipality of Málaga, the rate applicable to properties located in urban areas, which is the percentage applied to the cadastral value of the property to calculate the amount of IBI payable, is 0.4510%. On the other hand, some properties, including those used for commercial or industrial purposes, are subject to a different rate. For example, rural properties have a tax rate of 0.6543%.
Who pays the IBI when buying a house?
A common concern when signing a property purchase contract is who will pay the IBI for the current year. The aforementioned law states that the person who owns the property on 1 January of each year is the one who pays the tax. Likewise, it is advisable to negotiate in advance any agreement on who will pay the IBI and how much, and to record it in writing in the public deed of sale in order to avoid any misunderstandings.
Are there properties exempt from paying IBI?
Although IBI applies to most properties, there are exceptions. Some properties, such as buildings belonging to official organisations, churches and certain historical monuments, are exempt. Exemptions also apply to properties owned by non-profit organisations and communal woodland.
Local property tax discount (IBI)
In Spain, there are IBI bonuses for certain types of property and specific situations, which can significantly reduce the amount payable. These incentives include specific measures that vary according to the municipality in which the property is located. Some common bonuses in municipalities on the Costa del Sol, such as Marbella and Malaga, include
- Large families: In municipalities on the Costa del Sol, large families can obtain discounts on the IBI that vary from 30% to 90%.
- Renewable energy: Many coastal towns on the Costa del Sol offer up to 50% in the IBI of their properties that install self-consumption systems, such as solar panels.
- Renovation projects: Tourist towns such as Malaga, the capital of the Costa del Sol, offer significant discounts on this tax for the renovation of properties of cultural interest or the promotion of new construction.
- Subsidised dwellings (VPO): Málaga and other municipalities can grant a bonus of up to 50% on the property tax rate.
At Prime Invest, we are your ally in the process of buying a property
Understanding what the IBI is and how it works is key for those looking to buy a home in Spain since it is a tax that directly impacts the owners of any property.
At Prime Invest we are real estate consultants and we are here to accompany you in every step of this process. From buying and selling your home to tax advice to optimise your investment. Our team of experts in the Costa del Sol property market will help you with any questions you may have regarding taxes, cadastral value and any legal aspects relating to your new property. Contact us and make the most of your investment in Malaga and surrounding areas.
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