What is IBI? Property Tax

20th September 2024 · 2 min. read

The IBI (Property Tax) is a tax that property owners must pay, whether the properties are urban, rural, or have special characteristics. This tax is municipal, meaning it is managed by the Madrid City Council, which sets the tax rate and regulates its annual collection.

The IBI is governed by the Local Treasury Law, 2/2004, and applies to all property owners registered in the land registry, regardless of whether they are residents or not. It is important to note that the tax is mandatory and periodic, meaning that each year the owner must make the corresponding payment.

The Madrid City Council collects this tax through different methods, such as direct debit or in-person payments. It is highly recommended to opt for direct debit to avoid surcharges for late payments, as delays can result in significant fines.

The IBI is calculated by applying a percentage to the cadastral value of the property, which includes both the land and the construction. In Madrid, the current rates vary depending on the type of property:

Urban properties: 0.442%
Rural properties: 0.567%
Properties with special characteristics: 1.141%

The cadastral value can be consulted on the electronic headquarters of the cadastre using the property’s reference number. The formula for calculating IBI is simple: Cadastral value x Tax rate = IBI amount.

This tax must be paid by the person listed as the owner on January 1st of each year. Even if the property is sold later, the registered owner on that date will be responsible for paying the full year’s IBI unless otherwise agreed upon in the sales contract.

There are certain IBI exemptions, such as those applicable to State-owned properties, religious institutions, and non-profit organizations like the Red Cross.

In Madrid, IBI can be paid in a lump sum or in installments, depending on the options provided by the City Council. The payment period generally occurs between October and December each year.