Whenever and wherever you own a property there will be costs involved. Besides the obvious maintenance costs and utilities, there are also certain tax related costs which come with owning property in Ibiza.
We always advise our clients to discuss which taxes are applicable for your personal or business situation with your (tax) lawyer. They will also ensure all documents are submitted to the corresponding authorities and that taxes are paid in time.
Property tax – Impuesto Sobre Bienes Inmuebles (IBI) The most commonly known tax in Spain is the property tax called IBI, short for Impuesto Sobre Bienes Inmuebles. The IBI is a local tax on the ownership of property in Spain, payable yearly whether you are a resident or not. The IBI is calculated on the ‘Valor Catastral’, or the rateable value of the property, which can be significantly less than you paid for the property. The Valor Catastral is typically around 70% of the market value of your property and can be re-evaluated every 8 years. The tax rate goes from 0.4% – 1.1% of the valor catastral depending on the region.
It is imperative to make sure that your lawyer has registered your property with the Town Hall of your municipality.
Income Tax non-residents (Impuesto sobre la Renta de No Residentes – IRNR) If you own property in Spain you must pay an annual income tax, even if you are not a resident of Spain. This annual income tax is called Impuesto sobre la Renta de No Residentes. The tax varies depending on whether or not the property is rented out.
Not rented out If you do not wish to rent out your property and you do not have any other source of income in Spain you must pay income tax based on the valor catastral of your property. The tax rate is fixed as 19% of approx. 2% of the valor catastral of the property.
Rented out If you decide to rent out your property and therefore have income, you are obligated by law to declare this income and pay income tax on it. If you have no other source of income in Spain you will most likely end up paying a flat rate of 20% of the income that you earn from your property in Ibiza. If you do have other sources of income in Spain the taxable base and the tax rates will be determined by your circumstances. In most cases maintenance fees, property management costs and other property-related expenses can be deducted from your taxable base.
Wealth Tax (Impuesto Sobre Patrimonio) When you own property in Ibiza which is not considered your main residence (regardless whether you are a resident or not) you must pay an annual wealth tax based on the net value of your assets in Spain after permitted deductions, such as a mortgage. The tax is based on the net value of your property or another value deemed appropriate by the tax authorities, with a tax-free allowance of 700.000€ each. Above this amount, the tax rate works on a sliding scale starting at 0.28% and rising to 3.45% for residents and 0.2% to 2.5% for non-residents. Note that when a property is jointly owned the property is free of wealth tax for a value up to 1.400.000€.
Community Fees Buying a property in a gated community or resort has several advantages, such as more (private) amenities, security and privacy. However, when you purchase a resort property or a property within a condominium building you must, by law, become a member of the community of owners known in Spain as the Comunidad de Propietarios. Being a member means you pay your share of the community cost for the upkeep of the common areas and any other services that the community vote for. The cost for the upkeep can vary significantly per property so it’s always important to ask about the fees before purchasing the property.
Insurance Another cost which all property owners must pay is Household Insurance. The cost of this insurance will vary for each property based on the size and contents of the house and the circumstances of the owner.