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EXPLAINED: How to pay less Spanish IBI property tax

Spain’s property or council tax, usually referred to as just IBI, can vary considerably between municipalities, but there is a way to potentially reduce the cost of this annual tax.

EXPLAINED: How to pay less Spanish IBI property tax
Property tax in Madrid isn't as high as in other cities despite it being the Spanish capital. Photo: Luis Quintero/Pexels

IBI stands for Impuesto sobre Bienes Inmuebles in Spanish, which translates to tax on property goods, but it also goes by the name SUMA.

It’s a local tax which has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

As the IBI amount is decided by the town hall in which your property is located, there can be big differences between municipalities.

For example, in Malaga province there’s currently a difference of roughly €400 between what homeowners in the municipalities of Torremolinos, Cártama and Rincón have to cough up on average in IBI tax and what those who are based in Malaga city have to pay (based on a property worth €76,000).

How is the IBI calculated?

IBI or SUMA is calculated as a percentage of the cadastral value of the property, an amount which is recorded at the local land registry.

By law, IBI tax on urban properties must be between 0.4 percent and 1.1 percent of the value of the property, although it can be up to 1.3 percent in provincial capitals with more services and amenities.

Catastro and catastral are words you’ll come across a lot if you own a property in Spain – they essentially refer to the land registry or records office which has information about your property and all others in your municipality in Spain.

In recent years the Spanish press has even coined the word catastrazo to refer to big changes in the rate of property price valuation, something which some sources are saying will happen to 90 percent of properties in 2021.

The valor catastral (land registry value) of a property is determined by its location, size, the value of the land, the land’s urban characteristics, the material cost of the building and its age, among other factors.

Is it possible to pay less IBI?

Yes. In many cases there are discrepancies in the value assigned to your property by your local tax authorities and its actual value.

Using your cadastral reference number (20 digits) you will be able to check either in person at your local town hall or on this government website if your property has been overvalued and whether you are within your rights to pay less IBI tax. 

Keep in mind that in most cases, the value assigned to a property by your local land registry is below its actual market value, but if you suspect you are paying too much IBI or you’ve spotted mistakes on your property’s land registry record, this may be the correct path to follow.

It may be that you receive a notification from your town hall that the value of your home has been increased and you either spot mistakes or information you don’t agree with.

Idealista has this useful tool which allows you to get an estimate of a particular property’s sale value and fair rent evaluation, although Spain’s main property website does stress it is not a tasación official (official evaluation).

You will need to enlist professional help in order to assess whether it’s possible to make a claim, and as bureaucracy reigns supreme in Spain, you can expect a lot of paperwork.

Photo: Pexels/Pixabay

Tax optimisation companies such as 60 días or legal firms specialising in property like Ático Jurídico can help with this.

To narrow down your search for possible firms specialising in this, google the words subsanación de discrepancias en el catastro inmobiliario.

It may be possible for the property holder to present the claim themselves without seeking legal help, but don’t expect this to be easy and it will depend on the details of the alleged error by the land registry.

In the event that they find that you are paying more, it will be possible to ask to be reimbursed retroactively for the excess that you have been paying over the years as well.

Furthermore, if your local town hall agrees to the change of your property’s cadastral value, this will also mean you end up paying less in other taxes such as IRPF (income tax), Impuesto sobre el Patrimonio (wealth tax) and Impuesto sobre Sucesiones y Donaciones (inheritance tax).

So, if you’re paying thousands in IBI tax every year and you suspect it should be lower, it’s probably worth finding out if you can make a claim, as the government’s property appraisals usually only change every ten years.

It sounds complicated. Are there other ways to pay less IBI?

There are a number of other ways to save money on your annual property tax in Spain, although this will largely depend on what your town hall offers.

Paying by direct debit is often a way to shave off some euros, as many municipalities offer a 5 percent discount for those willing to set up this automatic yearly payment.

Single-parent families and families with three or more children can often get a discount of up to 90 percent on their IBI, so it’s definitely worth checking if your municipality in Spain offers this.

There could be other municipal discounts available, from installing solar panels in your Spanish home, to having your property be part of an agricultural cooperative.

READ MORE: What you should know before getting solar panels for your home in Spain

Social housing property owners can usually get a 50 percent discount on their IBI for the first three years as well.

As a result of the coronavirus crisis, some municipalities are offering struggling residents big discounts on their IBI too.

So the first port of call if you’re looking for a discount on your IBI tax should be your town hall or their website.

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PROPERTY

Home insurance in Spain: How does it work and what does it cover?

Home insurance in Spain has policies which may differ from what you're used to in your home country. Here's why Spanish home insurance may surprise you in terms of what it covers, what it costs, key info and whether it's worth getting.

Home insurance in Spain: How does it work and what does it cover?

If you’re moving to Spain and purchasing a property or even renting, one of the first and most important factors to consider is purchasing home insurance.

According to the latest data available, approximately 23 percent of households in Spain are uninsured. That percentage corresponds to around 6 million homes.

But with low prices and the wide range of situations Spanish home insurance covers, there’s little reason not to get it.

Contracting home insurance is only essential in Spain when you acquire a mortgage. The current Mortgage Law requires you to take out this insurance if you are going to buy a house with a loan and is an essential requirement for banks to grant you the money.

If you’re renting in Spain, you’re not obliged to contract home insurance, but it still may be a good idea.

Your landlord may have buildings insurance, but you may still want to take out some type of insurance to protect your own belongings or the contents of the property. 

In the UK, home contents insurance covers your personal possessions against theft, fire or other damage, while buildings insurance covers the structure of your property if the tiles on your roof are broken in a storm for example, the outside is damaged by fire or a tree falls on part of your property.

In Spain, home insurance works slightly differently. Like in the UK and other countries there are different types of insurance. 

READ ALSO: Is getting rental default insurance worth it for landlords in Spain?

What types of home insurance are there in Spain?

The most basic is seguros de daños or damage insurance which is similar to buildings insurance in the UK. This will only protect the structure of your property. This would be damage caused by major events such as fires, explosions, flooding, acts of vandalism or subsidence and you should still check the smallprint to be sure of the conditions. With flooding for example, most insurers cover flooding damage caused by rainfall greater than 40 litres per square metre per hour.

The second tier is seguros multiriesgo or multi-risk insurance. This covers both your building and its contents and is one of the most comprehensive types of home insurance in Spain.

This type of insurance not only covers big incidents like fire or theft, but it also covers a whole range of minor issues, which is very different from the type of contents insurance in the UK.

Home insurance is only essential in Spain when you acquire a mortgage. Photo: Louis Hansel / Unsplash

It can cover for everything from a blocked sink to a burst pipe in the wall or a broken radiator. Sometimes it may even cover the breakdown of your white goods such as washing machine and fridge, depending on how old they are and what your specific policy says.

It’s also especially useful for flat owners as it covers against damage to your neighbours’ property if something inside your apartment is at fault.

For example, if your shower or toilet breaks and starts leaking into the flat downstairs, your insurance should cover the damage to your neighbour’s ceiling so that you won’t have to fork out a fortune for fixing someone else’s property.

Many major cities in Spain have historic quarters and some of its nicest-looking apartment buildings are some of the oldest too, so it’s particularly useful if your property is old and prone to needing fixing regularly. 

The third and highest type of home insurance coverage in Spain is all-risk home insurance, which has extended coverage that includes robbery on the street, damage to extra storage rooms outside the main property or coverage for cosmetic damage.

What you need to know

Keep in mind that when you do claim or after you have claimed a couple of times, it’s normal that the insurance company won’t want you to be their client anymore and will terminate your contract.

This shouldn’t be a problem, however, you will simply contract a new home insurance policy with a different company. It helps to go with a broker so that they can present you with different options to choose from, so you know what’s the best.

Be aware that every insurance company will have a slightly different policy so just because a certain item may have been covered on your old policy, it doesn’t mean that will be on the new one or be covered to the same amount of money.

What are some of the most popular home insurance companies in Spain?

There are many different companies that offer multi-risk insurance policies in Spain, both international and national companies. Some of the most popular are:

  • AXA Home Insurance
  • Generali
  • Zurich
  • Mapfre
  • Caser
  • El Corte Inglés 

How much does home insurance cost in Spain?

As the multi-risk policies cover so many different aspects, you would imagine that they’re very expensive. Surprisingly though, these are quite affordable at under €200 per year according to the Organisation of Consumers and Users (OCU).

The price isn’t too different from what you’d pay in the UK. Money Supermarket says that a combined home and contents insurance policy in the UK costs around £140 per year, but usually it will cover a lot less. 

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