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Spain’s Valencia reduces IBI property tax for 700,000 homeowners

Valencia City Hall has announced that it will reduce the IBI property tax bill by at least 20 percent for at least 70,000 property owners in the city, meaning the average homeowner will pay €72.50 less a year.

Published: 7 May 2024 09:47 CEST

Spain's Valencia reduces IBI property tax for 700,000 homeowners

Property that either partner brings into the marriage usually leaves with them in divorce even if there's no prenup in Germany. But selling it during the marriage is a different matter. Photo: Larry Penaloza/Pexels

IBI (Impuesto sobre Bienes Inmuebles) is similar to council tax bill in the UK, but is only paid once per year. How much you pay depends on the value and location of your home. Generally, it’s paid by homeowners only, not tenants.

Valencia City Hall have said that 99 percent of residents will benefit from the lower rates, saving them a combined total of €70 million.

READ ALSO: What is Spain’s IBI tax and how do I pay it?

The Councillor for the Treasury and first deputy mayor, María José Ferrer San Segundo, has denounced “the fiscal hell to which the previous government subjected its citizens to for eight years”, and has celebrated that “the important respite that has finally arrived for the residents of this city, thanks to the reduction in taxes and rates approved by the government of mayor, María José Catalá”.

In real terms, it will mean an average reduction of €72.50 per household, which represents a total saving of €70 million as a result of the 20 percent reduction in the general tax rate.

IBI bonuses have already been applied to large families with reductions of 60 percent for those in the general category and 90 percent for those in the special category. In total, the 3,800 large families that pay IBI taxes in Valencia will be able to benefit from these measures.

“This is money that will stay in the pockets of Valencians and that will also contribute to further energising the economy and promoting job creation,” Ferrer said.

Other taxes besides the IBI will also be reduced in Valencia include the Vehicle Tax with an average reduction in rates of 8.5 percent. The reduction affects all types of vehicles and will mean a total saving of €2,082,542.40.

The capital gains tax for inheritance from relatives will also be reduced by the legal maximum of 95 percent, regardless of the cadastral value of the property.

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What are the Spanish tax rules on inheritance from abroad?

If you’re a foreigner living in Spain, chances are that not all of your family will be living in the same country as you.

You’ll likely have parents, grandparents, aunts and uncles living back home or even in another country entirely.

If you’re a tax resident in Spain, meaning you live here for more than 183 days of the year, or the majority of your interests are in Spain (like your property and your immediate family), then you’ll have to adhere to the tax laws and regulations here.

Article 6 of the Inheritance and Donation Tax law states that taxpayers with habitual residence in Spain are subject to inheritance tax as a “personal obligation”, regardless of where the inherited assets or rights are located.

This means that even if you receive your inheritance, which could be in the form of money or property, from abroad, you will be liable to pay tax on it here, simply because you live here.

It’s important to keep in mind, however, that the process of inheriting from abroad is much more complex than for national inheritance.

Each country has its own inheritance regulations, so you must be clear, not only the rules in Spain, but also the regulations of the country the deceased was resident.

READ ALSO: When should you turn down an inheritance in Spain?

According to AGM Abogados law firm, Spain currently has international treaties on inheritance with three countries – these are France, Greece and Sweden. It’s worth keeping in mind that these treaties refer only to inheritance, not gifts.

For example, if you have a parent who lives in France and you inherit a property from them when they die, you will not have to pay Spanish inheritance tax on it, you will only pay this in France.

If your family member lives in another EU country, the regulations are also easier (with exception of those in Denmark and Ireland). In this case, the law will be governed by the European Regulation of International Successions.

According to this law, a person who resides abroad can choose the law that applies to them in their will, whether that is their country of origin or that of their habitual residence. This means, however, that your relative will have to have been prepared and have to have factored in the fact that you live in Spain in their will.

READ ALSO – Inheritance tax in Spain: Should you pass your property on to your children or sell it to them?

In the event that there is no will or the person hasn’t decided, the legislation of the country where the assets to be inherited are located, will apply.

If your family member doesn’t live in the EU or they live in Denmark or Ireland, most likely Private International Law will be followed, which determines which rules are applied to inheritance.

If Spanish law is applied, Article 23 of the Tax on Inheritance and Donations states that the taxpayer may deduct the amount paid in tax abroad.

This means the taxable base is determined by taking into account all the assets and rights inherited, subtracting any deductible charges and debts, as well as any tax paid in the country of the deceased.

The succession tax rates will differ depending on how much is inherited, but it is generally progressive ranging from 7.65 percent on the first €7,933 up to 34 percent on €797,555+, but several bonuses can be applied to these rates.

It’s also worth keeping in mind that there are different inheritance tax rates and rules in each of the different regions in Spain, so what you pay will also depend on where you live in the country.

The regions with the highest inheritance tax rates in 2024 are Asturias, Catalonia and Castilla-La Mancha, while they are more favourable in Valencia, Aragón, La Rioja, Balearic Islands, Madrid and Galicia.

READ ALSO: Where are the best and worst places for inheritance tax in Spain?

Madrid for example offers a 99 percent reduction for all direct descendants and spouses, while other regions offer a lot less.

The amount you pay will also depend on your relationship with the deceased – for example, if you’re a child, a grandchild, a niece or nephew or sibling, different deductions and bonuses will apply.

Remember that if after you inherit, your assets outside of Spain come to more than €50,000, such as a property, you will have to complete form 720 in order in inform the Spanish tax authorities of your assets held abroad.

As the laws surrounding inheritance are so complicated and can depend on so many different factors, the most important thing to do is to make sure you contact a lawyer specialising in these matters.

They will be able to advise you on what exactly you’ll be obliged to pay and if there is anything you can legally do in order to minimise payments.

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