If you are the owner of any premises, surface or usufruct, or you wish to become the owner of any of them, you should know that there are different types of taxes that you will have to pay to the city council where you are. Among these taxes is the Real Estate Tax (IBI), which we will talk about and explain in more detail in this article.

What is the Real Estate Tax or Impuesto sobre Bienes Inmuebles (IBI)?

The Real Estate Tax is a direct tax, which is levied on the ownership of certain assets, which are paid to the municipalities according to the Spanish tax system.

When you own a real estate property, you must be registered in the General Directorate of Cadastre, so that you can pay the annual installments on the Real Estate Tax (IBI).

Unlike other types of taxes, the IBI is levied solely and objectively on the ownership of the real estate, that is to say, it is not based on any circumstance that the taxpayer is going through.

This tax is regulated by the Law regulating Local Treasuries of RDL 2/2004, the Real Estate Cadastre Law of RDL 1/2004 and the Development Regulation of RD 417/2006.

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What real estate is taxed by IBI?

According to the Spanish tax system, the taxable event that exists on real estate taxes is based on the ownership of any of the following rights:

• Administrative concession on the property or public services to which they are attached.

• Real right of surface.

• Real right of usufruct.

• Real right of ownership.

We should also mention to you that this real estate is classified by:

• Urban real estate.

• Rustic real estate.

• Real estate of special characteristics.

Urban and rural real estate

In order to determine the classification of an urban or rustic real estate property, the land on which it is built must be analyzed.

The Centro de Estudios FInancieros establishes that urban land is “land classified by urban planning as urban, land that can be developed according to the planning and that is included in sectors, the rest of the land classified as land for development as of the time of approval of the urban planning instrument that develops it and land that meets the characteristics contained in Article 8 of Law 6/1998, on the Land Regime and Valuations.”

In addition, those soils where urban constructions may be applied with the aforementioned conditions may also be classified as urban.

Therefore, for a property to be classified as rustic, it must not comply with the characteristics of urban land, nor must the property itself be classified as a special category property.

Real estate with special characteristics

On the other hand we have the properties that are considered with special characteristics, these types of properties are those complexes that have integrated land, buildings, facilities and different urban works that are dedicated to a purpose and are classified as one due to the need that each construction has to be able to have a functioning in all the facilities.

That said, the properties considered to have special characteristics are:

• Those intended for the production of electricity, gas, oil refining and nuclear power plants.

• Dams, waterfalls and reservoirs, except for those used for irrigation.

• Highways, roads and toll tunnels.

• Airports and commercial posts.

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To which cases is the real estate tax not subject?

There are certain specific cases where the IBI does not apply, since it is not subject to the provisions of the Texto Refundido de la Ley Reguladora de las Haciendas Locales (Revised Text of the Regulatory Law of Local Treasuries).

Case 1

All land roads and maritime-terrestrial and hydraulic public property, provided that they are intended for public use and free of charge.

Case 2

Real property owned by the municipality, such as:

• Public property assigned to the public.

• Assets in the public domain assigned to a public service which are managed exclusively by the municipality, with the exception of real estate assigned to third parties for a consideration.

• Patrimonial assets, with the exception of those transferred to third parties for a consideration.

IBI exemptions

As well as non-subjections, the IBI also has certain cases that are exempt to the payment of this tax. Let us remember that a non-subjection is when an operation does not apply to a taxation, while an exception is when there is an operation that according to the general rules of the tax does apply, but there is a rule that allows that such obligation is not paid in specific cases.

For the Real Estate Tax there are three types of exemptions, which we will explain below:

Ex officio exemptions

For trades exemptions are the following properties:

• Those owned by the State, autonomous communities or local entities that are intended for public safety, educational and penitentiary services.

• Those owned by the City Council.

• Those owned by the Catholic Church.

• Those owned by the Spanish Red Cross.

• Those that are exempted through international agreements.

• Surface area of woodlands populated with slow-growing species.

Exemptions requested

For the properties that have exemptions requested, we find a:

• Those destined to the education by center of teachers under the regime of educational agreement.

• Those declared as monuments or historical gardens of cultural interest.

• Surface of the forests where reforestation or regeneration of wooded masses are carried out according to projects or plans approved by the Forestry Administration.

Optional exemptions

Something that must be clarified about these exemptions is that they will be applied in the event that the municipalities so decide, then, those exemptions will be applied to:

• Publicly owned sanitary goods.

• Non-profit entities except those related to economic exploitations.

• Damage caused to real property by various meteorological phenomena or natural disasters.

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Taxable income

The taxable base that is applied to those real estate properties that pay IBI tax will be determined by the cadastral value, which is determined, notified and subject to challenge as stipulated by the regulatory rules of the real estate cadastre.

In turn, this cadastral value will be established by the cadastral value of the land and construction, which may not exceed the market value of the property, and which will be determined by different techniques and criteria established collectively or individually.

There are three types of valuations for real estate:

• Collective valuation procedure.

• Individualized valuation procedure

• Valuation procedure for real estate with special characteristics.

Net taxable income

As for the taxable base, this will be the result of applying a reduction to the taxable base whose cadastral value has increased due to the general procedures of collective valuation by the application of the value assessments.

The amount of this taxable base decreases annually by 0.1 and the application of the reduction will be applicable for a period of nine years from the entry into force of the new cadastral values.

Full amount

It is important to understand that the full amount to be applied to the Real Estate Tax will be the result of applying to the taxable base the tax rate applicable to urban, rustic and special characteristics real estate.

For urban real estate, the tax rate will be 0.4%, and may reach a maximum of 1.10%.

For rural real estate, the tax rate will be a minimum of 0.3%, and may reach a maximum of 0.9%.

For special category real estate, a tax rate of 0.6% will be applied, which can be differentiated between each City Council, since they can establish another tax rate, but which cannot be lower than 0.4% or higher than 1.3%.

In addition to these tax rates, there are other increased rates, which include:

• Those municipalities that are capital of a province or autonomous community will have a rate of 0.07% for urban property and 0.06% for rustic property.

• Those municipalities that provide surface public transport services will have a rate of 0.07% for urban and 0.05% for rural properties.

• Those municipalities in which the municipality provides more services than those required by Article 26 of Law 7/1985 of April 2, 1985, the rate will be 0.06% for rural and urban properties.

For municipalities in which rustic land represents more than 80% of the total area, the rate will be 0.15 for rustic properties and for urban properties it will not apply.

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Allowances on the total tax liability (tax liability)

There are certain types of allowances that are obligatorily applicable to the full amount of the Real Estate Tax, the amount that remains after subtracting these allowances from the full amount is called the taxable amount. Among the allowances we find:

• For the integral quotas that are in municipalities of Ceuta and Melilla, the rebate will be 50% of the total quota.

• For those properties used for the activity of construction, urbanization, construction and real estate promotion companies, the rebate will be from 50% to 90% of the total quota.

• In the case of subsidized housing, a 50% reduction of the gross tax rate may be applied during the three periods following the granting of the definitive qualification.

• For rural properties owned by agricultural cooperatives and communal land exploitation, the benefit granted is 95% of the total quota.

• For those properties owned by large families, the allowance may be up to 90% of the total tax liability.

Surcharges on the full quota

As well as there are bonuses, there are also certain surcharges to the total quota applied to the real estate, these surcharges are applicable for:

• Municipalities may impose a surcharge of up to 50% of the tax liability for permanently unoccupied residential property.

• Metropolitan areas may impose a surcharge of 0.2% on the tax liability for real estate located within their territory.

As you may realize, the Real Estate Tax (IBI) is quite complex to understand 100%, it is best to seek advice from experts in the field, for this reason, in TAS Consulting we offer different consulting services, which will be tailored to your needs so you can have all your tax payments up to date.