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What is property tax IBI? How it is paid and how it is calculated.


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If you are thinking of buying a house, before doing so it is important that you make accounts for the costs of buying the house on the one hand and how much it will cost you to maintain it on the other. In addition to possible repairs and the community of owners, you will also have to face taxes. The most important (and expensive) is the IBI or Real Estate Tax.

 

What is it and how is the IBI domicile changed?

The IBI is a tax that is paid every year to the municipalities and that taxes the ownership of any property. In other words, it is a tax that is paid for the simple fact of owning a house, even if it is empty, and whose management depends on the municipalities.

 

This tax applies to all properties, whether flats, houses, premises and even garages. There are some exceptions such as state properties, autonomous communities or those used by foreign governments, which are exempt from paying the IBI.

 

This tax can be paid by direct debit from your bank account. If you want to pay it via direct debit, usually it can be done through the city council web-site to which the property corresponds (in some provinces there is a special agency responsible for this tax collecting), or by phone, in person.

 

How is the IBI calculated?

The IBI is calculated by applying a percentage of the cadastral value of the house. This cadastral value can vary, depends on municipality, but not the criterias how it is determined. These criterias are set by the General Directorate of Cadastre, and they are:

The location of the property..

The cost of material and construction.

Taxes on construction, quality or use.

The market value of housing.

The age of the building.

 

On the cadastral value, each municipality can apply a coefficient of between 0.4% and 1.3% for urban buildings. This coefficient varies depending on the type of property.

 

As an example, to calculate the IBI of an apartment with a cadastral value of €100,000 located in Madrid, that figure would have to be multiplied by the coefficient for these properties (in the event that no reduction coefficient is applicable), which is 0.510%. The result of the IBI calculation for this case would be €382.5.

 

A series of bonuses and reductions can also be applied to this general formula.

The three most important are for:

Officially protected housing, which can apply a 50% bonus for the first three years.

Rustic goods of agricultural cooperatives, which are entitled to a 95% bonus.

Special bonuses for certain cases such as large families.

 

To this are added the discounts that some municipalities apply if you domicile the receipt to facilitate the collection of the IBI (such as in Madrid and Barcelona).

 

Who needs to pay the IBI?

This is one of the issues around the IBI that raises the most doubts. As a general rule, the IBI must be paid by the homeowner on the specific data - January 1, even if the tax is paid later, which is very common.

 

In case of doubt about who pays the IBI in the purchase and sale of a property, if the buyer or the seller, the answer is that it will normally be the seller, who is usually the owner of the property on January 1.

 

In addition, from a legal point of view, you must pay the entire IBI, not just the proportional part of the time that the house has been yours. However, it is common to reach an agreement between both parties to add it to the purchase price, although this will not affect the money you can ask for as a mortgage. For example, if I sell you a house on April 1st, I would contribute 4 months and you will pay the rest. 

 

Who pays the IBI on the rented property?

Legally, the owner is the one who must pay the tax. In fact, it is one of the expenses that you can deduct from the rent you charge when calculating your tax gain.

 

When is the IBI paid?

The IBI is an annual tax and each municipality has its own payment schedule. In most cases, the deadline to pay the IBI is between September 1 and November 30. If in doubt, check with your city council.

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