IBI tax on undeveloped land set to plummet

Instead, they will pay 'rustic' or 'farmland' tariffs, which are a fraction of the price.

This will come as a breath of fresh air for hundreds of thousands of people who bought plots of land with the intention of building a house on it or selling it to a developer, but who saw their plans thwarted by the property market crash and the recession.

In the Comunidad Valenciana alone, one of the most-populated coastlines and an area which saw a real building frenzy in the 'boom' years, some 50,000 hectares of land fit this description – up to 1.8 million homes were due to be built on them either for private use or for resale.

And throughout Spain as a whole, 'developable' land which has not been built on totals over 900,000 plots.

Even where the council has reclassified a plot of land to allow it to be built on, owners will pay their annual IBI tax at 'agricultural land' rates, which in some cases rarely reaches double figures.

They will not have to pay 'residential rates' until they have a concrete plan for constructing property, planning permission from the council, and necessary infrastructure such as mains drainage and water and electricity connected to the grid.

At this point, even if the property or estate itself is not yet built, the owner will have to pay IBI per square metre at the same level as those with identical land which has been developed.

Owners themselves do not have to take any action, since it is the town councils who are obliged to inform the land registry about plots classified as fit for development but which are not in fact developed.

This will create extra work for local authorities and will have a huge impact on income for the public coffers, but may force councils to get their act together and speed up planning permission applications where these have been requested.

The rule covering new rates has been incorporated into Spain's mortgage and land registry law, and will come into effect from November 1 this year.

But it was the Supreme Court which forced the issue after settling a case last year which dated back to 2007.

Landowners in the western city of Badajoz whose 'rustic' plots were reclassifed by the council without consultation saw their IBI rates rocket by up to 1,000%.

They will now get a refund on any overpaid taxes, since the court upheld their complaint and it has since been codified into national law.