5 key aspects of the Property Tax (IBI)

One of the issues that has marked the current situation in the real estate sector in recent months has been that of the Housing Act. Within this new regulation, one of the most talked about aspects has been the surcharge in Real Estate Tax (IBI) for empty homes. In this current context, it is especially interesting to review some aspects related to this tribute.

As you may already know, the IBI or Real Estate Tax is a local tax that is part of the Spanish tax system. What is taxed with it is the ownership and real rights that you have over real estate. In addition, it should be remembered that it is paid annually.

How to calculate IBI?

To calculate the IBI, the first thing to know is that the taxable base is the cadastral value of the property. This value can be easily obtained through the cadastre's electronic office. It can also be consulted, by phone or in person, at the cadastral registrar's office.

On the other hand, when calculating the liquidable base, as explained by cadastre, the following should be taken into account:

“ex officio a decreasing reduction for ten years. This reduction is 90% of the increase in the cadastral value in the first year of the revision, 80% in the second and so on until a liquidable base equal to the revised cadastral value is reached in the tenth year. This means that, in general, the taxable base for which it will be taxed in the first year of the revision is equal to the previous (unrevised) value plus 10% of the increase in value experienced by the property as a result of the revision”

It is also up to municipalities to determine the applicable rates on this basis. This is something that depends on each council, although the law sets limits. Thus, the minimum rate is 0.4 and the maximum is 1.1 for urban buildings. In the case of rustic ones, the minimum is 0.3 and the maximum is 0.9.

Real Estate Tax rebates

City Councils not only define the type that applies to the tax, but they have the power to define bonuses. But, in addition, mandatory bonuses are collected at the national level. This is done in the Local Treasury Regulatory Act.

Article 73 establishes bonuses for buildings such as public housing. This reduction will be 50% of the tax rate and will last for the three tax periods after the property is qualified as a VPO. They are also subject to this type of bonus, for example, the rustic assets of agrarian cooperatives.

Is there real estate exempt from paying IBI?

• The answer is clear. Yes Not all properties are required to pay Property Tax, in fact the Local Treasury Regulatory Act, specifically in its article 62, recalls that the following types of properties are exempt from paying IBI:
• Those that are owned by the State, the autonomous communities or local entities that are linked to issues of public security, educational services, penitentiary services or that belong to the State and are part of the national defense.
• Common property and common neighborhood mountains.
• Real estate of the Catholic Church as provided for in the Agreement between the Spanish State and the Holy See on Economic Affairs.
• Real estate belonging to the Spanish Red Cross.
• Properties that are exempt by virtue of international conventions in force.
• Area of mountains populated with slow-growing species defined by regulations.
• Land occupied by railroad lines or stations, warehouses or any other service necessary to operate that railway passage.

Who pays Real Estate Tax on a purchase or when inheriting a flat?

Another of the most common questions related to the IBI is who is responsible for paying the tax when a purchase and sale is made. When buying a property, it is very important to know that it is the seller who must pay the Property Tax, since on January 1 of that year, the seller was the owner of the property for sale. However, it should be considered that the seller could pass on to the buyer the equivalent part as long as each one has been an owner.

Another of the most common cases is the obligation to pay the IBI of an inherited home. If the property becomes owned by a single person as the owner, this person would have to be responsible for paying the IBI. Even so, if the property passes into the hands of several owners, each of them must pay their proportional share.

How the housing law affects IBI

The Bill for the Right to Housing, or better known as The New Housing Law, brings with it several new developments that directly affect the real estate market. One of these novelties is the overload in the IBI for empty homes, in order to encourage the rental of buildings and thus provide greater supply for citizens.

This measure allows municipalities to apply a maximum recharge of 150% on the installments of empty homes. For a property to be subject to this penalty, it would have to meet certain characteristics:

• Empty homes for more than two years without just cause.
• In the case of individuals who own more than four homes.

The justified causes would be, according to the Bill:

• Temporary transfer for work or training reasons.
• Change of address due to dependency or reasons of social emergency.
• Properties intended for second home use with a maximum of four years of continuous unemployment.
• Properties subject to construction, rehabilitation or other circumstances that prevent their effective occupancy.
• That the home is being the subject of a dispute or case pending judicial or administrative decision.

Real Estate and Rent Tax

One issue that needs to be made very clear about the IBI is its subscription to a lease. The most important thing to remember is that the landlord is usually responsible for paying the IBI. But, even if this is the norm, it does not mean that it is mandatory, in fact the Urban Leasing Act or LAU, establishes that it can be agreed that the tenant is responsible for paying this tax.

The fact that the tenant is able to pay the IBI does not mean that the tenant is responsible, the LAU explicitly states that this agreement “will not affect the Administration”. Therefore, the owner will continue to be responsible for the payment of the Property Tax.

Finally, in relation to this question, the LAU also establishes that for the agreement to be valid it must be in writing, therefore, this agreement should be reflected in the rental agreement, as well as the annual amount.

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