Spain: IBI tax vs. wealth tax differences

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Real Estate Agent

Anna Siudzińska is a dynamic business strategist and experienced manager with a proven track record in sales, marketing, and corporate expansion. With years of experience navigating both domestic and international markets, she specializes in driving growth, strengthening companies' market positions and helping clients find lucrative real estate opportunities in Spain.

What exactly is the IBI tax in Spain and what does it cover?

IBI tax (Impuesto sobre Bienes Inmuebles) is an annual municipal property tax that applies to all real estate owners in Spain, whether residents or non-residents.

This tax covers all types of real estate including residential homes, apartments, commercial spaces, garages, storage units, and land plots. The tax funds essential local services such as road maintenance, waste collection, street lighting, public parks, and municipal facilities.

As of September 2025, every property owner in Spain must pay IBI tax regardless of whether they live in the property, rent it out, or leave it vacant. The tax applies to both urban and rural properties throughout all Spanish municipalities.

It's something we develop in our Spain property pack.

The revenue generated from IBI tax directly benefits the local community where your property is located.

How is the IBI tax calculated and what percentage of property value is usually applied?

IBI tax is calculated based on the cadastral value (valor catastral) of your property, not its market value.

The cadastral value is typically 50% to 70% lower than the actual market value of the property. Spanish municipalities set their own IBI tax rates, which generally range from 0.4% to 1.3% of the cadastral value for urban properties.

Most residential properties in major Spanish cities like Madrid, Barcelona, and Valencia face IBI rates between 0.4% and 1.1% of their cadastral value. Rural properties often have slightly different rates, sometimes ranging from 0.3% to 0.9%.

For example, if your apartment in Barcelona has a cadastral value of €150,000 and your municipality applies a 0.8% rate, you would pay €1,200 annually in IBI tax. If the same property had a market value of €300,000, you're only taxed on the lower cadastral amount.

The cadastral value appears on your property's cadastral certificate and IBI tax bill, making it easy to verify the calculation.

How often do you pay the IBI tax and who collects it?

IBI tax is paid annually, with payment periods typically running from May to October, though exact deadlines vary by municipality.

Your local town hall (Ayuntamiento) collects the IBI tax directly, and they issue the annual tax bill. Some municipalities offer the option to pay in two installments, while others require a single annual payment.

Many Spanish municipalities provide early payment discounts ranging from 2% to 5% if you pay by a specific early deadline, usually in May or June. Some towns also offer automatic bank debit options for convenience.

The municipal tax office handles all IBI-related matters including bill generation, payment processing, and any disputes about cadastral values. You can typically pay online through the municipality's website, at local banks, or directly at the town hall.

Missing the payment deadline results in immediate interest charges and potential fines imposed by your local municipality.

Who is legally responsible for paying the IBI tax when a property is rented out or sold?

The person registered as the property owner on January 1st of the tax year is legally responsible for the entire year's IBI tax, regardless of any subsequent sales or changes.

If you sell your property in June, you remain responsible for the full year's IBI tax since you owned it on January 1st. However, buyers and sellers often negotiate a proportional split of the annual IBI tax in their purchase contract, though this doesn't change the legal obligation to the municipality.

For rental properties, the property owner always remains responsible for IBI tax payments. Tenants have no legal obligation to pay IBI tax unless specifically written into the rental contract, which is uncommon in Spanish rental agreements.

When buying property in Spain, always verify that previous years' IBI taxes have been paid, as outstanding IBI debts typically transfer with the property. The municipality will pursue the current registered owner for any unpaid IBI taxes from previous years.

Property management companies can handle IBI payments on behalf of owners, but the legal responsibility always remains with the registered property owner.

What exactly is the Spanish wealth tax and what assets does it apply to?

Spanish wealth tax (Impuesto sobre el Patrimonio) is an annual tax on the net wealth of individuals, targeting those with significant assets above specific thresholds.

For Spanish residents, the tax applies to their worldwide assets including real estate properties, bank accounts, investment portfolios, business shares, artwork, luxury vehicles, boats, jewelry, and other valuable possessions. Non-residents only pay wealth tax on their Spanish-located assets.

The tax calculation uses market values, not cadastral values like IBI tax. Real estate is valued at current market prices, while financial assets use December 31st values from the previous tax year.

Key assets subject to Spanish wealth tax include secondary homes, investment properties, rental properties, commercial real estate, luxury cars worth over €50,000, boats, private aircraft, art collections, and significant cash deposits or investments.

Notable exemptions include your main residence up to €300,000 in value, pension rights, household contents (except luxury items), and certain business assets under specific conditions.

At what net worth level does the wealth tax start to apply and what are the main exemptions?

Asset Category	Exemption Amount	Details
General wealth threshold	€700,000	No wealth tax below this net worth level
Main residence	€300,000	Primary home value exempt up to this amount
Business assets	Variable	Qualifying business participations may be exempt
Pension rights	Full exemption	All pension plans and rights excluded
Household contents	Generally exempt	Except luxury items like art, jewelry over specific values
Debts and mortgages	Fully deductible	Outstanding loans reduce taxable wealth
Personal belongings	Generally exempt	Cars, boats, aircraft over €50,000 are taxable

How are the rates of the wealth tax structured across different regions of Spain?

Spanish wealth tax rates vary significantly between autonomous regions, with each region setting its own rate structure and potential exemptions.

As of September 2025, Madrid offers a 100% regional allowance, effectively eliminating wealth tax for Madrid residents. Catalonia applies rates from 0.21% to 2.75%, while Andalucía ranges from 0.24% to 3.03%.

Valencia applies wealth tax rates between 0.25% and 3.12%, with Asturias ranging from 0.22% to 3%. The Balearic Islands have some of the highest rates, from 0.28% to 3.45% depending on wealth levels.

These rates apply progressively to different wealth brackets. For example, in Catalonia, the first €167,129 above the €700,000 exemption is taxed at 0.21%, while amounts over €10.7 million face the maximum 2.75% rate.

It's something we develop in our Spain property pack.

Can you give a concrete example comparing how much someone with a €500,000 property would pay in IBI tax versus wealth tax?

For a €500,000 property with a cadastral value of €300,000, the IBI tax would range from €1,200 to €3,900 annually depending on the municipal rate.

Using a typical 0.8% municipal IBI rate, the annual IBI tax would be €2,400 (€300,000 × 0.8%). This tax applies regardless of your total wealth and must be paid every year you own the property.

For wealth tax on the same €500,000 property, if this is your only significant asset and your main residence, you would pay zero wealth tax. The €300,000 main residence exemption plus the €700,000 general exemption threshold means most single-property owners below €700,000 net worth face no wealth tax.

However, if you owned this €500,000 property plus other assets totaling €800,000 net worth (after the €300,000 main residence exemption), you'd have €100,000 subject to wealth tax. In Valencia, this would result in approximately €250 annual wealth tax (€100,000 × 0.25%).

The key difference: IBI tax applies to all property owners annually, while wealth tax only affects those with substantial net worth above regional thresholds.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Spain versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

Are foreigners or non-residents subject to both IBI tax and wealth tax in Spain?

Yes, both foreign residents and non-residents owning Spanish property must pay IBI tax and may be subject to Spanish wealth tax.

All property owners in Spain, regardless of nationality or residency status, must pay annual IBI tax to their local municipality. There are no exemptions based on citizenship or residency for IBI tax obligations.

For wealth tax, non-residents only pay on their Spanish assets, not their worldwide wealth. If you're a non-resident with Spanish property worth over €700,000, you'll face Spanish wealth tax on those Spanish assets. The main residence exemption of €300,000 still applies if the Spanish property is your primary home.

Foreign residents of Spain face the same wealth tax obligations as Spanish citizens, with the tax applying to their worldwide assets above the €700,000 threshold. This includes properties, investments, and assets located anywhere in the world.

Non-residents can benefit from tax treaties between Spain and their home countries, which may reduce or eliminate double taxation on the same assets.

What practical steps should a property owner take to stay compliant with both IBI tax and wealth tax obligations?

1. **Register with local authorities**: Ensure your property is properly registered with the municipal cadastre and you receive annual IBI tax bills at the correct address.2. **Set up payment reminders**: IBI deadlines vary by municipality, so calendar the payment dates for your specific location to avoid late fees and interest charges.3. **Monitor wealth tax thresholds**: Track your net worth annually, including all assets minus debts, to determine if you exceed the €700,000 wealth tax threshold.4. **Keep detailed asset records**: Maintain documentation of property values, mortgage balances, and other assets for accurate wealth tax calculations.5. **Consider regional differences**: If you're planning to become a Spanish resident, research regional wealth tax rates and exemptions that could affect your total tax burden.6. **Update property valuations**: Ensure cadastral values are current, as municipalities periodically update these values which directly impact your IBI tax bill.7. **Consult tax professionals**: Spanish tax laws are complex, especially for non-residents, so professional advice ensures compliance with both taxes and potential optimization strategies.

Are there strategies or deductions available to reduce either IBI tax or wealth tax?

IBI tax reduction options are limited since rates are set by municipalities, but some strategies can help minimize the burden.

For IBI tax, check if your municipality offers early payment discounts, typically 2% to 5% off the total bill. Some municipalities provide discounts for families with multiple children, senior citizens, or individuals with disabilities, though these vary significantly by location.

If you believe your cadastral value is too high, you can challenge it through the municipal cadastre office, though this process requires supporting evidence and professional valuation reports.

Wealth tax offers more reduction opportunities. Mortgage debt and other loans are fully deductible from your taxable wealth, so maintaining mortgage financing can reduce your wealth tax base. The €300,000 main residence exemption should be maximized by ensuring your primary home is properly designated.

Consider establishing residency in Madrid, which offers a 100% wealth tax allowance for residents, effectively eliminating the tax. Some regions offer reduced rates for certain business assets or investments, making strategic asset allocation important.

It's something we develop in our Spain property pack.

What are the penalties for failing to pay either IBI tax or wealth tax on time in Spain?

Late IBI tax payments immediately trigger interest charges and municipal fines that compound over time.

IBI penalties typically include daily interest charges calculated from the original due date, often at rates between 3% and 5% annually. After 30 days late, municipalities can impose additional fines ranging from 10% to 20% of the outstanding tax amount.

Municipalities can place liens on properties with unpaid IBI taxes and ultimately initiate foreclosure proceedings for chronic non-payment. These liens appear in public property records and must be cleared before selling the property.

Wealth tax penalties are more severe, with the Spanish tax authority (Hacienda) imposing fines between 50% and 150% of unpaid taxes depending on the circumstances. Late filing without payment can result in minimum fines of €300 to €400, while intentional tax evasion carries criminal penalties.

Both taxes accrue compound interest until fully paid, making early resolution crucial. The Spanish tax authority has broad collection powers including bank account seizures and salary garnishments for unpaid wealth taxes.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. Taxadora - IBI Tax in Spain
2. SpainEasy - IBI Property Tax Spain
3. Sublime Spain - Wealth Tax in Spain
4. Health Plan Spain - IBI Property Tax 2025
5. EuroUSAFA - Spanish Wealth Tax Explained
6. Balcells Group - Wealth Tax in Spain
7. GM Lawyers - IBI Tax Spain
8. Spain Costas - IBI Tax Responsibility