Answers to the four big questions about the IBI: Property local rate in Spain

What is it the property local rate in Spain? How is it calculated? Who pays for it? Will go up?

With the arrival of Autumn many Spanish households begin to receive the famous ‘little leaf’ with the amount of the Property local rate in Spain, the IBI. Basically, this tax taxes the possession of a home or premises. In Spain you can get to pay up to 3,000 euros for a single-family property.

In a country where both property and ours like it, it is the salvation of the public coffers. In fact, it is the only tax in the Spanish tax system whose collection has never fallen. And not only that, its collection has increased by 42.8% in the last five years.

Who is obligated to pay it?

The payment of the IBI must be assumed by the person or entity that owns the home on January 1 of the year in which the receipt is issued. In case there are different owners, the payment of the tax can be distributed among the different owners. If it is the case that you are a tenant, consult your rental agreement if you are required to pay it or what legal percentage corresponds to you.

What do you put on the receipt?

The receipt is headed by the property on which the tax is applied. To identify it, the physical address and the cadastral reference are used. In the receipt, the cadastral value of the house (formed by the price of land and construction) will also appear. The cadastral valuation can not be higher than the price of the property in the market or in the free floors or in those of official protection. Periodically, the town councils update the cadastral value to match the property’s IBI to its situation in the market.

How is the amount calculated?

It is fixed by each municipality freely, since they are the ones that have competence. For urban real estate that quota must be between 0.4% and 1.1% of the assessed value. But Royal Decree Law 20/2011 establishes temporary surcharges of up to 10% with respect to those mentioned, varying according to the age of the securities presentation that has given rise to the cadastral value. There are important differences between the municipalities, depending, for example, on whether it is a provincial capital or the public services offered by the consistory.

Will it go up with the tax reform?

The decision to raise the receipt of the IBI has the city councils within limits set by the Government. In the recent tax reform presented by the Ministry of Finance, an increase in the tax has been ruled out. In this way, the Ministry accepted the requests of the municipalities that demanded that it not go back up. In the case of the IBI, the tax represents an average of 23.08% of the total revenue of a municipality.