Has your bank account been frozen due to unpaid local taxes?
If you own property in Spain, you are required to pay several yearly taxes to the town hall where your property is located. The most important of these are the IBI (Impuesto sobre Bienes Inmuebles) and the rubbish collection tax.
The town hall assumes you are aware of your obligation to pay these taxes and will issue and send the yearly demands by post without verifying if you’ve received them. So, if your regular postal worker is on holiday and a less attentive replacement is working, or if you live in a rural area and never received the mail, the town hall will still consider you notified. Some property owners only find out about their outstanding taxes when their bank account is frozen (embargoed), as the notice of the embargo and the accumulated debt may also not reach them. Suddenly, you may discover you have a large debt with the town hall, with the original tax amount having more than doubled due to fines, interest on late payments, and legal fees associated with the embargo.
How can I avoid this?
- Ensure you have no outstanding debts with the town hall.
- Set up a direct debit with your bank and the town hall to cover all your local taxes.
- Find out the dates when these taxes will be debited from your account, and each year, make sure they have been deducted on time.
- If the payments haven’t been taken, act immediately. It could be due to insufficient funds or an administrative error by the bank or the town hall. Late payments will result in fines and daily interest, so the sooner you address the issue, the better.
- If the taxes weren’t paid from your account, the direct debit may have been cancelled. You will need to reinstate it.
Plan ahead for IBI tax discounts
As a property owner in Spain, there may be steps you need to take before the end of the year to benefit from IBI discounts in the following year. Check if any of these reductions apply to you:
Compulsory Reductions (required by law):
- Property developers can request a 50% to 90% reduction before construction begins, applicable for a maximum of three years during the construction period.
- Owners of protected properties (protección oficial) can request a 50% reduction for up to three years after the property is officially designated as protected.
Optional Reductions (discretionary, based on town hall decision):
- Families with many members (familias numerosas) can receive up to a 90% reduction.
- Properties with solar energy installations can benefit from up to a 50% reduction.
- Installing an electric vehicle charging point may qualify for a 50% reduction.
- If you are registered with the town hall (empadronamiento), a reduction may be available. Note, however, that only tax residents of Spain should register, as the tax office may interpret registration as residency and investigate for unpaid income taxes.
- Setting up a direct debit for your local taxes may also entitle you to a discount.
In most town halls, the application for IBI reductions must be submitted before the end of the year. If you want any reductions applied to your 2025 IBI, make sure to review your local municipal regulations (ordenanzas municipales) before 31 December 2024.
Splitting the IBI Demand
If the property in Spain is owned by multiple individuals, the demand will only be issued in one owner’s name. If there is a good relationship between the co-owners, this typically isn’t a problem. However, difficulties can arise when dealing with separated spouses or heirs who are not on good terms.
To avoid these issues, you can request that the town hall to split the IBI demand. You will need to provide certain documents, such as a copy of the property deed. However, keep in mind that if one owner fails to pay their share of the tax, the town hall can pursue the debt from any of the other owners. This is because IBI is a property tax, not a personal one, meaning all owners are equally responsible for its payment.
