Although the State establishes the fundamental aspects of local taxes, i.e. the events that can be taxed and defines the essential elements of each of them. The local councils are free, through their tax by-laws, to modify some of their elements, such as the applicable tax rates, coefficients of increase or allowances.
Classification of local taxes
Local taxes can be classified according to two criteria; on the one hand, their voluntary or compulsory nature and, on the other hand, their nature as direct or indirect taxes.
Compulsory local taxes:
Mandatory local taxes that must be collected in all local councils include:
- Tax on Economic Activities.
- Tax on Real Estate.
- Tax on Motor Vehicles.
Tax on Economic Activities
The Tax on Economic Activities (IAE) is a compulsory, direct and real tax, in addition to being of shared, municipal and census management.
The taxable event of the IAE is constituted by the mere exercise in national territory of business, professional or artistic activities, whether or not they are carried out in specific premises and whether or not they are specified in the tax rates.
Each of the economic activities listed in the IAE rates establishes the tax rate assigned to each economic activity or the criteria for its determination, so that each taxpayer must find the specific heading under which they must pay tax, as the tax rate is determined on the basis of the tax rates.
The taxpayers of this tax are individuals, legal entities and entities that carry out any of the activities that give rise to the taxable event on national territory.
They are exempt from IAE:
- Public administrations, their autonomous bodies and entities of a similar nature.
- Start of economic activity (during the two tax periods).
- Small and medium-sized companies [individuals and IS taxpayers, civil companies and the entities of art. 35.4 of the LGT that have a net turnover (INCN) of less than 1,000,000 euros].
- Social Security managing bodies and social security mutual societies.
- Public research bodies and educational establishments.
- Non-profit associations and foundations.
- Spanish Red Cross.
- International treaties and agreements.
- Emergency situations.
- Non-profit organisations.
- Bank of Spain.
- Port authorities and State ports.
- Communities of waters and inheritances of the Canary Islands.
- International Public Oversight Board on Auditing Standards, Professional Ethics and Related Matters.
There are three types of fees, depending on the area in which the economic activity is carried out:
- Minimum municipal fees. These allow the corresponding activities to be carried out in the municipality in which the activity takes place.
- Provincial quotas. These authorise the exercise of the corresponding activities in the territorial area of the province in question, without the need to pay any minimum municipal tax.
- National fees. These entitle the holder to carry out the corresponding activities throughout the national territory, without the need to pay any minimum municipal or provincial fee.
Real Estate Tax
The Real Estate Tax (IBI) is a direct tax of a real nature, which is compulsorily levied by local councils.
The taxable event of this tax is the ownership of the following rights over rustic and urban real estate and over real estate with special characteristics:
- Of an administrative concession over the properties themselves or over the public services to which they are attached.
- Of a surface right in rem.
- Of a real right of usufruct.
- Of the right of ownership.
The concept of real estate for the purposes of IBI is set out in article 6 of the Law of Real Estate Cadastre (LCI), which indicates that, for the exclusive cadastral purposes, a plot or portion of land of the same nature is considered to be real estate, located in a municipal area and enclosed by a polygonal line that delimits, for these purposes, the special area of the property rights of an owner or of several owners in indivision and, where appropriate, the buildings located in this area, regardless of their owner and independently of other rights that apply to the property.
The date of accrual of this tax is 1 January of each year.
The taxpayer of this tax is the natural or legal persons, as well as the entities of article 35.4 of the LGT who hold the ownership of the right (cadastral titleholder) which, in each case, constitutes the taxable event of this tax.
The taxable base will be constituted by the cadastral value of the real estate.
The Tax on Motor Vehicles
The Tax on Motor Vehicles (IVTM) is a compulsory, direct, real, periodic and fixed-rate municipal tax.
The taxable event of the IVTM is made up of two elements: a subjective element, given that it is levied on the ownership of mechanical traction vehicles suitable for use on public roads, whatever their class or category, and an objective element, insofar as vehicles are considered suitable for use on public roads if they have been registered in the corresponding public registers and have not been deregistered, including vehicles with temporary licences and tourist registration plates.
Those liable to pay IVTM are individuals, legal entities and entities owning mechanical traction vehicles that can be driven on public roads.
In this regard, the vehicle must be registered in the name of the taxpayer on the vehicle registration certificate issued by the Dirección General de Tráfico, so that, for the purposes of this tax, there is absolute identity between the owner of the vehicle and the owner who appears on the registration certificate.
The IVTM tax rate is regulated as a fixed rate tax in which no mathematical operation is required to obtain it.
In this sense, the IVTM quotas are set out in the tax rates, in which there is a quota assigned for each of the vehicle classes and for the different brackets established in each of them and, therefore, they are the fundamental instrument for determining the tax quota.