I was having a coffee and a chat with a friend in Ibiza the other day. Whilst talking he mentioned some important and significant changes to the law regarding buying property in
Ibiza.
Ronnie Bohler, who runs Island Network Ibiza, to whom I am indebted for this advice, explained a huge change in the tax laws, laws which in the UK would be called Capital Gains
Tax.
I am sure you are only too aware of the financial crisis in Spain, not just at a national level, but also at a regional level. Recently Barcelona and Valencia have both asked the national
government for bailouts and they are not alone. This has led to local councils finding ever more ingenious ways of increasing their tax revenues. I know that tax is not the most riveting subject,
but if you are thinking about buying a house in Ibiza read on, you will need to be fully aware of this fundamental change to the way this property tax is collected.
The town hall (ayuntamiento) have begun to implement a change in the law that ensures that all capital gains tax emanating from land and buildings (Impuesto Incremento Valor Terrenos Naturaleza
Urbana – or “Plusvalia Municipal”) must be paid in full upon transfer of title – in other words when the property changes hands.
The town hall will control and monitor these payments by ensuring that only those transactions on which the tax has been paid can be entered onto the property register. This includes all forms of
property transactions including gifts and inheritances. (Law 16/2012, 27th December 2012).
There is an important and interesting element to the law. It stipulates that it is the seller who is liable. Until now it had been the responsibility of the purchaser – and in some cases this was a
very substantial sum.
The interesting part is that although the buyers are no longer responsible for the tax, they now have a clear responsibility to ensure that the tax has been paid by the seller, otherwise
they will not be able to register their purchase, which in turn means that they will not have full and unfettered ownership.
This is a stroke of genius - it requires very little input from the town hall, which will just watch the money flow in as people come to Ibiza to buy their dream homes.
My advice? If you are thinking about buying a property in Ibiza, you must ensure that you have the appropriate legal advice as to not do so could expose you to significant stress and costs. If you
need any help or advice we would love to hear from you.
Author Phil Dibbs is the man who walks his talk, having purchased his own property on Ibiza. His company, Hawkmoor Associates
Ltd, is available to assist in an advisory capacity on property purchases in Ibiza.
Photo: Tamas Kooning Lansbergen