Costs Associated With Owning Property in Spain

When buying a property in Spain, it is important to be aware that there are certain taxes and fees relating to that property that will need to be upheld either monthly and/or annually. These include council tax bills (IBI), refuse collection tax bills (Basura), community fees if you live within an urbanisation with communal grounds, and annual tax declarations, even if you are a non-resident and live outside of Spain for more than 183 days per year. These costs can sometimes be rather unexpected for foreign property owners in Spain, and others are not even aware that they need to pay them.

To summarise each one:

Community fees: When you buy property that forms part of an urbanisation, you automatically become a member of the “Community of Property Owners” of that complex, and it is necessary to pay community fees.The community ensures that the common areas in which you have purchased your property are visibly maintained and kept up to scratch. This includes the maintenance of communal gardens/patios, swimming pool cleaning and general upkeep of grounds through contracting a community management and administration company.

IBI and Basura taxes on the other hand, are paid to the local authority and are used to pay for local services and infrastructure such as roads, rubbish collection, street lighting and general maintenance. These are the equivalent of council tax or rates in the UK.

As for annual tax returns, if Spain is your country of main residence, you will need to declare your annual income tax return known as the ‘Declaración de la Renta’. This is the case for all Spanish residents. If you are not a Spanish resident however, you will still have to declare annual taxes simply because you own a property in Spain. These are paid in addition to paying your taxes in your home country, as it is a state property tax that you are obligated to pay.

How to pay these taxes and fees

It is normal practice for the lawyers acting on behalf of the buyer to transfer utilities, taxes, and community fees to the new owner once the purchase has finalised, as well as set up direct debits for these payments on the buyer’s behalf. However, if there was no lawyer involved, these procedures are left up to the new owner to sort out themselves.

IBI and Basura taxes are local taxes that are to be paid to the town hall; however, depending on where you buy in Spain there are different agencies to pay these through, i.e., the ‘Patronato’ in Malaga or ‘Suma’ in Alicante. payment of community fees should be discussed with the community president.

Be aware that there are scenarios where if bank accounts are not kept topped up, or they are frozen because the bank has requested certain details (mainly regarding non-resident fiscal details), that the direct debits can bounce causing debts to amount without the property owner even being aware.

As for annual income tax and non-residents tax, the Spanish tax year ends on the 31st of December each year. Non-residents taxes need to be declared before this date and they relate to the year a posteriori to the current year you are in (2023 non-resident tax returns should be filed by December 2024, for example). On the other hand, income tax returns (la declaración de la renta’) for the year 2023 (Jan-Dec) must be filed no later than the 30th of June 2024.

Please note that if you rent out your property, a completely different scenario applies, as you must declare tax declarations quarterly instead.

What happens if payment is not made

If community fees are not being paid, the community President will contact the property owner in question to request payment as soon as possible. If debts continue amount, the President can issue a court demand for payment, which in extreme cases can result in seizure of the property. In other cases, if the property was to be sold for example, it is possible for the community President to request the monies owed from sale of the property to pay off outstanding debts.

If there is substantial debt outstanding, it is possible for communities to hire debt collection agencies to chase property owners back in their home countries.

With regards to IBI and Basura taxes, if these are not paid on time, you will be charged a penalty fee. This can be between 5% and 20% of the total owed. Ultimately, continued failure to pay IBI or Basura on a property may result in a charge being registered against it. A payment plan can be set up to make fractioned payments if the debt owed is a large sum.

If you do not submit your tax returns on or before the required date, there is the possibility of being sanctioned by the tax office, and the applicable sanction depends on the severity of the infraction committed. It is always best to seek independent advice and check if you need to declare annual taxes whether you think you do or not!

How to pay off any outstanding debts/taxes

If you are concerned about your tax position in Spain or if you have outstanding debt, or even a charge registered against your property, it would be sensible to seek legal advice to move forward with the best solution for your circumstances. Our team of experts would be very happy to help.