The growth of the property tax bill over the past few years

The housing sector is currently going through times of change and is experiencing a strong evolution. Specifically, in the recent years it has experienced the known housing-sector crisis to cease the construction of new real estate developments completely. Up to that point, the usual thing was that the Municipalities increased each year the immovable property tax raising due to the volume of house building was growing without stopping.

As you already know, the Real Estate Tax (IBI) is the tax on Real Estate that fits in the local tax system of Spain. All municipalities are required to claim them, tax the value of ownership of domain and other rights that cover real estate. Thus, homeowners, buildings or plots must pay a taxation to the Municipality that corresponds to them. It is a local tribute.

The latest data published by the Ministry of the Treasury reflect that the collection of the IBI exceeded in 2014 the 13,145 million euros for the first time. Thus, in the last decade the income derived from the local tax paid by property owners have doubled. Thus, in the last decade have doubled the income derived from the local tax paid by property owners. The data were published in the third quarter last year. Thanks to these figures, the IBI is the tax that has best evolved towards the interest of public funds. It only exceeds the Personal Income Tax (IRPF), VAT and corporate business tax.

This causes that the municipalities are the only administration that enters more money than it spends. Although it joins the Stability Law, passed in 2012 as an anti-crisis measure that limits the possibility of raising municipal spending. This is facing the situation of red numbers presented by the Head Administration, the autonomous communities and Social Security.

The IBI is the only tax of the Spanish tax system whose collection has never declined or fallen, not even in the smallest moments of the Spanish economic crisis. It is a stable and countercyclical tax. Their survival to the housing bubble is due to mere tenure and not to the buying and selling of properties.

In just a decade the collection has doubled. In 2006, IBI revenues amounted to only 6,000 millions. No other tax has experienced this increase of 112 %. Between 2004 and 2014, IRPF income increased by 52 % and VAT by 26 %. For its part, in the autonomous field…

In several media it has been highlighted the results of two other taxes in the autonomous field: Taxes on Conveyance of Assets, Documented Legal Procedures (ITP/AJD) as they have evolved inversely to the IBI. The ITP taxes the buying and selling of properties buying and selling of properties the AJD taxes the formalization of mortgage loans. In 2004 these taxes contributed more than 12,000 million euros. Ten years later the collection has been limited to 6,561 million. It is a decrease of almost 50 %.

During the housing boom, these two taxes meant a very important source of income for the autonomous communities as it was a time of wastage in public works constructions. The problem is when, at the time of the crisis, the volume of collection by these fiscal figures was abruptly interrupted, causing a very high level of public deficit.

This is not the case with IBI, for the simple reason that it is the owner, this tax must be paid each year. Thus, the decrease experienced by the purchase and the buying and selling of properties did not affect its collection. In addition, the collection grows when the cadastral value of the property rises with the simple passage of the years.

If this were not enough, the government led by Mariano Rajoy approved in 2012 a measure that established an increase in IBI between 10 % and 4 %. This measure had to last only two years, however, it has continued to the current days.

The IBI in Málaga

If we have to compare Malaga with the rest of Spain, it always wins. Last October, the digital newspaper ‘La Opinión de Málaga’ published the news that thirteen municipalities in Málaga have IBI types from all over Spain. The localities of Alameda, Algatocín, Ardales, Benahavís, Benadalid, Casabermeja, Cortes de la Frontera, Istán, Júzcar, Mollina, Monda, Pujerra, Riogordo and Serrato maintain the type of housing tax in urban centers at 0.4 %, the minimum established by law. Thus, owning a home in these municipalities is extremely cheap.

In addition, another 16 municipalities do not even reach the 0.48 %, being situated in a strip of little fiscal pressure with a views to the owners of houses. In the first case, the rate applied in the IBI is 0.451 %. For example, in the case of Nerja, which is a very touristic area, it is at 0.475 % well below the provincial average. These data support the moderate fiscal pressure exerted by the municipalities of Málaga. It is very remarkable that in Málaga there is no municipality that exceeds 1 % of tax rate in the IBI. For example, Alicante — a province similar to Málaga as to municipalities and tourism — the minimum applied by some of its municipalities is 1 %, so it shows the good situation that presents Málaga in view of purchasing a home.

Torremolinos is the town with the highest rates in the province and IBI rates are 0.98 %. At the same time, they have been demanding that the services they provide are well above those required and must attend a floating population based on the apartments and tourist apartments that have more concentration in the summer months.

How IBI is calculated

Going back to the data of the IBI, we can assure the stability that has undergone its evolution, since the tax is paid each year. The volume of the tax is calculated depending on the property value of the property, which is periodically reviewed by the municipalities who establish the amount to be paid based on two values contributed by the Government.

1. The cadastral value of each property is awarded by the Catrasto (the census of real estate of a given population containing the physical, economic and legal description of rural and urban properties). This value is calculated based on different variables such as the location of the property, its age, the cost of construction, its state, etc.
2. A coefficient or percentage on said cadastral value that can be chosen by the city council itself.

In addition, each municipality may establish a series of bonuses or reductions as stipulated by law or at its discretion.

Posted on 31/03/2017