The owners of real estate in Spain every year are obligated to pay to their Council the commonly called “Contribution”, and that actually receives the name of Impuesto sobre Bienes Inmuebles (or Property Tax).
Specifically, it is a tax that taxes the ownership of the real estate, whether it is rural or urban. It is related to the value of the house of property and not with the characteristics of who is obliged to pay.
- Taxable person: a person who owns the property.
- The taxable base: the cadastral value of the property.
- The type of tax: it is what will be applied to the tax, which will vary depending on the number of inhabitants of the autonomous community where the property is located.
- The tax quota: the total of what we pay. (The result of applying the tax rate applicable to the tax base)
- Exemptions: the real estate that doesn’t have to pay this tax.
Who has to pay this?
- People that own properties on January 1 of each year. In case of purchase-sale of the property, the IBI must be paid by the person that owns the property on January 1 and even if he sells it later.
- They must also pay the usufructuaries, i.e. those who have a usufruct right for example on a property that has been inherited.
- When there is more than one owner, the amount to pay can be divided and each one pays its share.
They exist by law. It establishes some bonuses and also allows the City Councils to establish others that appear in a closed list. Therefore the bonuses that are applied are different from one City Council to another.
It depends on two factors:
- The given value of our property that will be calculated from the cadastral value.
- The tax rate that applies in each municipality.
The Cadastral Value
It is determined each year by the Cadastre. It is used as a basis to calculate most taxes that are related to real estate such as IBI.
The cadastral values must be revised, at least every 10 years to be closer to the values by which the houses are bought and sold.
The cadastral value can’t exceed the market value of the house by 50%, although nowadays this rule is not met in many cases due to the fall in prices caused by the economic crisis.
When establishing cadastral values, several factors are taken into account that reduce the property value, such as its age, conversion status, and so on.
Powers of the City Council
The City Councils have the freedom to adapt the IBI to the economic situation of the citizens. Therefore, they have the competence to set and agree:
- Establish the type of Tax, within what is allowed by the Law.
- Ask to Cadastre to update the values of the municipality’s properties.
- Approve the bonuses that the Law authorizes.
- Postpone payments.
- Approve special subsidies in relation to the payment of this Tax for groups with special economic needs.
The IBI in Palma de Mallorca
Palma presents one of the lowest real estate taxes (IBI) occupying the 43rd place out of 52. The IBI rose its average in 2016 by 3.5% for modest houses. Only in places like Bilbao, Palencia or a Coruña, it’s cheaper this rate than in Palma.