Ministry of Finance Prepares an IBI Hike that will Affect 1,200 Town Halls in 2019

1 October 2018 – El Independiente

The Ministry of Finance has already prepared the list of town halls that will review the cadastral values of their urban properties in 2019. That list includes almost 1,200 town halls, equivalent to 15% of the total. That is according to an Order published in the Official State Gazette (BOE) on Saturday, which also reveals that the update coefficients will be established in next year’s Budget Law, which the Government has not presented yet.

Therefore, despite not having published its annual accounts yet and with the threat that, once they are published, it may have to adopt a more restrictive public deficit path, thanks to the situation it inherited from the previous PP Government, the ministry led by María Jesús Montero has published the mandatory order proposed in the Law to apply possible cadastral value rises that will impact the amount raised by Town Halls through taxes such as the Property Tax (also known as the ‘Impuesto sobre Bienes Inmuebles’ or IBI).

The town halls affected include Badalona (Barcelona), Cádiz, Santander, Guadalajara, Avilés (Asturias), Granada, Huesca, Lorca (Murcia), Coslada (Madrid), Las Rozas (Madrid) and Valencia.

The State’s annual accounts for 2019 are incognito and so it remains to be seen how this review of cadastral values is going to be instrumented.

Moreover, by virtue of the coefficient that is applied, the cadastral value of any given home may increase or decrease. The reason is that the coefficients are established on the basis of the year of entry into force of the last presentation of municipal values, which is basically the document that contains the criteria that are used to carry out the most recent valuations in the region.

Currently, the price per metre squared of private homes amounts to €1,587.9, the highest value since the second quarter of 2012, according to data from the Ministry of Development, which bases its figures on appraisal values.

From this perspective, in general terms, homes valued since that date will have increased in value, whilst those valued between 2008 and 2012, will have decreased. On the basis of the years of entry into force of the values, around one third of the municipalities included on this list belong to the latter group.

A decrease in the number of reviews

The cadastral value of a home is the reference value on which taxes are paid on it at a municipal level for purpose of the Property Tax (IBI), which is one of the main sources of financing for Town Halls.

In this way, unless town halls decide to introduce changes in the tax, bonuses or exemptions, increases in the cadastral value of properties typically mean a heavier burden on the pockets of citizens and, in parallel, more revenues for the town halls.

In order to carry out this review, the interested town halls must make a request each year to apply the coefficients that they establish. To do that, three requirements must be fulfilled: at least five years must have passed since the entry into force of the cadastral values resulting from the previous valuation; there must be substantial differences between the market value and those that serve as the basis for determining the cadastral values; and the town hall must file its request by 31 May.

Having fulfilled those criteria, 1,200 town halls have requested a cadastral review next year, which represents a 14% decrease compared to the number recorded last year. Moreover, that figure equals almost half the number recorded in 2007, when up to a third of all town halls, around 2,500, proceeded to apply new coefficients (…).

Original story: El Independiente (by David García-Maroto)

Translation: Carmel Drake

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