Property tax (IBI) and its settlement
By Armin Gutschick and Anja Sämann-Gutschick
Anyone who has a property in Ibiza must pay their local council the corresponding annual property tax. This tax makes no distinction between residents and non-residents, and is applied in exactly the same way to all owners. Other taxes such as income tax or capital gains tax involve the taxpayers presenting a declaration and paying the amount they themselves have calculated, a mechanism called self-assessment or reverse-charge. Contrary to that, due settlement of the IBI or property tax is notified yearly by means of a bill that is sent to the address of the property in Ibiza. A direct debit can be arranged so that the Council settles the bill automatically from the owner’s bank account. This is highly advisable, as that way you avoid any possible delays in payment and the interest on arrears that involves.
The amount to be paid for this tax depends mainly on two factors: the cadastral value and the tax rate. Over the last few years, all five municipalities in Ibiza have updated their cadastral values. In Santa Eulalia, for example, the new cadastral value is in effect since 2011 and involves in many cases a significant increase over and above the old one.
This cadastral value also affects other taxes, such as for example the income tax of residents and non-residents. Many non-resident owners do not understand the difference between the settlement of the IBI and the tax declaration for non-residents (a document called ‘modelo 210’) which they must present if they are using the property themselves. For those properties that are not a main residence (second homes in Ibiza), an amount is taken as the net base of income for rental that in reality is not obtained (a fictitious rent) and which will be, depending on the revision date, 2% or else 1.1% of the cadastral value of the property. In 2017, the tax rate that was applied to that amount was 24% and the period for payment will finalise at the end of this year, that is, on 31st December 2018.
Let’s see an example: The owner of a holiday home in Santa Eulalia uses the property only during the summer and does not rent it out. The cadastral value of the property is 100.000 €. As the owner is a non-resident, he or she must contribute 24% of their income, which includes the fictitious rent of that home for the whole year. Since the cadastral value has been revised and updated in Santa Eulalia these last few years, the net base is taken to be 1.1%, which amounts to 1.100 €. The owner must pay 24% of that as Income Tax for non-residents, which would add up to 264 € in this example.
If, on the contrary, the owner rents out the property, all the income resulting from this rental will be taxed. The expenses derived from the property, such as for example financial costs (the interests on the mortgage) and running costs (water, electricity) can be deducted in each quarterly declaration. The tax rate applied to income for non-residents due to rentals is 19%.
Going back to the IBI property tax, its amount depends on the cadastral value and also on the tax rate. A difference is established between urban land, which carries a tax rate of between 0.4 and 1.1%, and rural land, for which, depending on the municipality, the tax rate is between 0.3 and 0.9%. In 2017, the municipality of Santa Eulalia established this tax on rustic land as 0.5%.
The IBI bill includes a series of data: as well as various reference numbers, the name of the taxpayer and the detail of whether the land involved is urban or rustic. The property is identified by means of the cadastral number, but the data that is held in the Property Registry is not included. When a change of ownership happens, often the bill for the current year is issued in the name of the seller, even if the land registry has been informed of the change. Also included are data regarding the value of the land, on the one hand, and of the buildings, on the other. The cadastral value of the property is the sum of the value of the land and of the building. The year when the last revision was made is also mentioned explicitly. At the end of the bill, the tax rate and the amount to be paid are indicated. •