Who pays the IBI in a sale and purchase?
Table of Contents (8)
- What is the IBI?
- When is the IBI paid?
- Who pays the IBI in a sale? The seller or the buyer?
- What new developments has the case law doctrine of the Supreme Court included?
- Is there any special provision if the buyer is a consumer?
- What should the buyer do after purchasing the property?
- Other frequently asked questions about who has to pay the IBI in a sale and purchase
- Conclusion
If you are thinking about buying or selling a property, it is normal to wonder what taxes and levies you must pay. One of the most frequently asked questions in the office is, without a doubt, the Property Tax or IBI and who pays the IBI in a sale, specifically, about who should pay the one corresponding to the year in which the sale of the property takes place.
What is the IBI?
The IBI is a direct tax that levies the ownership of real rights over urban, rural, or specially characterised real estate, regulated by Royal Legislative Decree 2/2004, of 5 March, which approves the revised text of the Local Tax Law.
It is characterised by being a municipal tax, so its collection and the amounts to be paid depend on what is established by the City Council where the property is located.
When is the IBI paid?
The IBI is an annual tax, which also coincides with the calendar year and is accrued on the first day of January each year, as deduced from article 75 of the Local Treasury Law.
However, we must not confuse the accrual (the moment when the payment obligation arises) with the moment of making the payment, which is later and set by the Town Councils, who, in many cases, offer the possibility of splitting the payment of the tax into different instalments throughout the year.
Who pays the IBI in a sale? The seller or the buyer?
We arrive at the question raised in this post about who pays the IBI in a sale, which is based on the principle of the autonomy of the will of the parties, that is, what the buyer and seller freely agree upon prevails, without prejudice to what is established by the Supreme Court and which we will see later, with three possibilities existing:
- The seller pays it: According to articles 61, 63 and 75 of the Local Tax Law, the taxpayer of the tax is the owner of the property on the first of January. As, logically, on that date the owner is the seller, it will be the seller who is obliged to pay to the local Treasury.
It is important to remember that, in the absence of an agreement between the parties, this is the general rule, with the seller being the one who must make the payment. - The buyer pays it: the parties may agree that the buyer pays the IBI. This agreement is especially made when the purchase is carried out in the first months of the year, although nothing prevents agreeing that the buyer pays it in another case.
However, as the general rule is that the seller pays it, the agreement must be expressly stated in a public deed. - It is paid pro rata or proportionally: The parties agree that it will be paid by both parties in proportion to the number of months each has been the owner.
In any case, it is advisable for the buyer, and common in practice, that even if the payment is made pro rata or charged entirely to the seller, the buyer withholds the amount owed to pay it directly to the Town Hall. In this way, the buyer ensures full payment, freeing the property from any “escape” by the seller.
What new developments has the case law doctrine of the Supreme Court included?
The Supreme Court, through the Judgment of 15 June 2016, introduces an important novelty regarding who pays the IBI in a sale, establishing the following rules:
- The will of the parties prevails. The one who the parties agree upon must pay.
- In the absence of an agreement, the person obliged to pay remains the owner as of 1 January, that is, the seller.
- If the seller pays, they have the right to claim or pass on to the buyer the proportional part of the tax in proportion to the time each party has enjoyed it during the year of sale.
- Without prejudice to this, the parties may agree on the impossibility of passing on the cost.
Is there any special provision if the buyer is a consumer?
Article 89.3.c) of the General Law for the Defence of Consumers and Users states that “in all cases the following are considered abusive clauses: The imposition on the consumer of the costs of documentation and processing that by law correspond to the business. In particular, in the sale of homes: The stipulation that imposes on the consumer the payment of taxes for which the liable party is the business”.
Therefore, in the case of the purchase of a home between a consumer buyer and a business seller, the agreement by which the buyer must pay the entirety of the IBI will not be valid; however, it would be imputable to them on a pro rata basis, in accordance with the doctrine of the Supreme Court.
What should the buyer do after purchasing the property?
Once the deed of sale has been granted, the buyer must notify the corresponding Town Hall of the change of ownership and request the change of address for the IBI bills, so that future bills are charged to them and not to the seller.
Such change will take effect from the first of January of the year following the purchase and, consequently, the IBI for the year of sale will not be affected.
Other frequently asked questions about who has to pay the IBI in a sale and purchase
In Catalonia, it is most common for the buyer to agree to assume the IBI from the day of the sale (what is known as the proration of the IBI between seller and buyer). What happens is that since the electronic IBI collection system is not updated until the end of the fiscal year, the IBI for the year in which the sale takes place will be charged to the seller.
If there is an agreement to prorate the IBI, the proportional part of the IBI from the purchase until the end of the fiscal year must be paid by the buyer to the seller. The usual practice is to do this at the notary's office at the time of signing the deed, which provides greater security for all parties involved. If this is not done in this way, the buyer will be obliged to pay the proportional part of the IBI that corresponds to them and, if they do not make the payment, the seller can claim it by all means permitted by law, including judicial claims for payment.
The City Council can seize and auction the property to recover the payment of the outstanding tax, regardless of its ownership.
It is advisable to carry out this check before signing the deed of sale to avoid payment demands from the Town Hall to the buyer of the property. At the notary's office, it is one of the tasks we perform when preparing a sale, to ensure that there are no encumbrances or issues with the sale.
To claim the IBI from the buyer, the first step is to check your sales contract and see if there is a clause regarding the distribution of the IBI. If there is, you can demand payment, even claim it through legal means, although as we have said, the usual practice if the IBI is prorated is for the buyer to pay the portion that corresponds to them at the time the deed of sale is signed.
As we have seen, the payment of the IBI for the current year of a property sale, whether an apartment or a house, corresponds to the owner as of 1 January. However, the agreement for the payment of the tax between the parties involved prevails according to the months the property has been enjoyed in that year and must be reflected as such in the public deed of sale.
In Catalonia, the most common agreement is the proportional proration of the IBI between the seller and the buyer.
If you want to learn more about the deed of sale, we recommend this post:
Property sale contract: what you need to know
The IBI is paid throughout the year and its payment always corresponds to the current year. The town councils offer the possibility of a single payment or payment in instalments during a voluntary period.
This local tax must be paid to the town hall and can be paid directly at the bank or also be direct debited. It is also common that it can be paid at the town hall offices or on their websites.
The amount of the tax will depend on the cadastral value of the flat or house and the rates applied by the town hall.
By contribution we refer to any levy or tax paid to the authorities, this includes taxes such as IRPF or VAT and IBI. Contribution, therefore, is a broader term that encompasses various taxes and IBI is a specific tax, although many people colloquially refer to IBI as "the contribution".
Conclusion
To summarise the above, and taking into account the doctrine of the Supreme Court, what the parties have agreed shall prevail, which must be expressly stated in the deed of sale. Otherwise, the payment corresponds to the seller, who may claim from the buyer the proportional part of the IBI.
In any case, it is advisable:
- To attend the signing of the sale with everything agreed and not leave this agreement until the last moment. It would not be the first time that the parties start arguing in the middle of the signing about who pays (this post is addressed to them).
- For the buyer’s security, it is advisable that they withhold the amount of the IBI and pay it.
I hope these few lines about who pays the IBI in a sale can be helpful. If you are interested, you can read other posts from our notary office in Barcelona on this Blog, such as the following:
In case of doubts, at JLA Notarios Asociados in Barcelona, we are at your complete disposal to resolve them.
