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All about IPTU: What is it and how to calculate the tax?

Do you know what IPTU is?

The beginning of the year usually brings a lot of expenses to the budget of Brazilian families. In addition to expenses with tuition and school supplies, it is also time to collect municipal debts and taxes, such as IPVA and IPTU.

But do you know how IPTU is charged? The collection of this tax is directed to owners or tenants of properties in urban areas and takes place through a guide sent by the city hall where the property is located. It is configured as one of the main sources of financial resources for the municipalities.

So, how about taking the opportunity to learn more about the subject? Read on through this article and understand more about this national tax.

What is property tax?

The acronym IPTU stands for Urban Property and Land Tax and is a charge made to those who own one or more properties in the city. Each property has its corresponding property tax, so those who own several properties will have more taxes to pay.

And in case you are wondering how IPTU is charged, check out below.

IPTU is charged for both residential and commercial properties. Thus, owners of apartments, houses, buildings and commercial offices need to pay the tax – in some cases, the payment is passed on to tenants.

The tax is annual and is normally levied in the first months of the year. The city hall is responsible for communicating the property tax and payment methods to the owner. Generally speaking, it can be paid in cash or in installments.

It is also worth noting that IPTU is charged only when there is a property built in the urban area. Anyone who has only one piece of land – without a built property – must pay a different tax: the Urban Land Tax (ITU).

Those who live in rural areas pay the Rural Land Tax (ITR). The calculation of tax rates for each tax is done differently.

What is the property tax for?

You have just understood what IPTU means – a municipal tax that represents, today, one of the main sources of income for Brazilian city halls. Despite focusing on the ownership of real estate, the use of the tax is not linked to the real estate area.

Public expenses that are covered through the amount collected via IPTU by the city hall. Source: Live

The resources obtained by the municipality through the payment of IPTU are not linked to any specific expenditure pattern. Therefore, they can be used to defray the most diverse expenses of the city’s administration.

The city hall is responsible for the collection and also for the destination of the amount received with the IPTU. Consequently, the money is used to support public spending, such as those related to:

  • improving infrastructure and paving the streets;
  • construction of sewage and sanitation systems;
  • maintenance and expansion of the public lighting network;
  • investments in health, education, among other areas.

In summary, the amounts collected from the IPTU, and also from other taxes (such as the Tax on Services – ISS), are used to guarantee the fulfillment of municipal obligations towards the population.

What is the tax calculation based on?

IPTU does not have a fixed rate for all properties in a municipality. As well as the Tax on Motor Vehicle Ownership (IPVA), which is levied on the ownership of cars, the rate depends on the characteristics of each good, that is, it is the specifics of the property that indicate the amount of tax due.

In addition, each city hall may have different criteria for the calculation – which will also cause variations in rates in different cities in Brazil and in the same state.

In general, the IPTU is calculated based on the property’s market value. But beware: it is not about the value of your property for sale in today’s real estate market.

The market value is the price of the property according to the criteria used by the Public Authority (generally, the most important factors are its age and location). Therefore, it can be very different from the market value.

Based on the market value, the municipality applies rates and possible additions or discounts, depending on the calculation method adopted by it. In addition, the tax amount may change annually, mainly because of the appreciation of the property or the region where it is located.

In relation to IPTU rates, it is common for city halls to adopt a progressive character. In other words, larger proportions of the tax are levied on properties of greater value, while goods of lesser value also contribute to lower rates.

How is IPTU calculated?

In the previous topic, we explained the concept of marketable value, which is the basis for calculating the real estate tax in Brazilian cities. This concept is also used as a reference for other situations, such as when the city hall can charge IPTU, a recurring doubt.

When the city hall needs to compensate residents in case of expropriation, for example, the market value is also considered.

The market value is usually calculated using the formula:

Formula for calculating IPTU, where V = A x VR x I x P x TR. Source: Live

In it:

  • V refers to the market value;
  • A is the area of ​​the land or building;
  • VR is the standard residential unit value (which depends on each municipality);
  • I is the age of the property;
  • P is related to the location of the property;
  • TR is the residential typology, that is, it is equivalent to the characteristics of the construction.

The result of the formula is usually the main factor considered when calculating the IPTU. Thus, knowing the market value of your property, it is possible to calculate how much tax will be charged (based on the rate defined by the city each year).

It is precisely because it is not a national tax that the charges are attributed to each city hall. So, it is always worth stressing that the calculation and rates can change according to criteria used by cities.

Is there an exemption from IPTU?

Taxes often have some exceptions, configuring people who are exempt and do not need to pay them. With the IPTU it is no different. There is, yes, the tax exemption, according to the characteristics of the property or owner.

However, knowing who is exempt or not depends, once again, on the particularities of each Brazilian municipality. This is because each of them defines specific rules, making some cities have a greater exemption range than others.

It is important to highlight that the tax is levied on both individuals and legal entities. In other words, both residential properties and commercial buildings and buildings are subject to the rate.

The IPTU exemption varies according to the municipality. For example, there are municipalities that do not levy the tax on public servants or retirees or pensioners. Properties with marketable values ​​below a certain limit are also usually exempt.

Other reasons that can lead to IPTU exemption in many cities in Brazil are real estate:

  • transferred to the Public Authority;
  • used by institutions that carry out social work;
  • that host the realization of cultural projects;
  • overturned.

In addition, the tax amount may be lower in some cases, even though there is no total exemption from payment. It is worth finding out about the matter directly with the city hall in your city to have accurate data about any exemptions.

How can I find information about IPTU?

All information about exemption or fee for collecting municipal debits and taxes can be accessed on the city hall’s channels. It is possible to update on the subject seeking face-to-face assistance, calling or consulting the municipality’s website.

An important warning: those who are thinking about acquiring a property or have just bought one need to pay attention to the IPTU consultation. In case of change of owner, the tax is linked to the property, not the taxpayer.

Therefore, there is the risk of acquiring IPTU debt, if you buy a property that did not have regular payments. In that case, they will become your responsibility as the new owner of the property.

A visit to the website of the city hall in your city can avoid problems and keep you informed about the tax charges in relation to your property. There, it is even possible to check the history of IPTU values.

In addition, contacting the city hall allows you to check possible debts and payment statements. This is also how the taxpayer can know the IPTU rate for the year and how the payment will be made.

Particularities, such as deadlines and due dates, forms of payment, incidence of interest or late fees, discounts for cash payment, depend on each city hall.

So, you need to access the website of the city hall in your city to get to know them.

Here are the electronic addresses of 10 Brazilian capitals to consult IPTU information:

  • São Paulo;
  • Rio de Janeiro;
  • Belo Horizonte;
  • Salvador;
  • Federal District;
  • Porto Alegre;
  • Goiania;
  • Fortaleza;
  • Curitiba;
  • Recife.

What happens if I don’t pay IPTU?

In this post, you saw that IPTU is mandatory throughout Brazil. Therefore, unless you are exempt from the tax for some reason, you must pay your bill on time.

There are negative consequences for those who don’t. See some of them below.

interest and fine

The first effect felt by those who do not pay the tax is the collection of a fine for the delay, as well as interest for the time the debt was outstanding.

In general, city halls offer a discount for those who pay the IPTU at a single rate, ie, in cash. Taxpayers who pay in installments do not have a discount, and those who are late pay an even higher amount.

It is important to be aware of the accumulation of interest, in case the delay turns into default. Failing to pay annual taxes can create a real snowball.

Inclusion inactive debt

The second consequence of late payment of IPTU is the inclusion of the debtor’s name in the municipality’s outstanding debt. It is a negative register made by the Public Power. The taxpayer is usually included after a delay of more than 90 days.

The name can also be registered with credit protection agencies, such as SPC and Serasa.

The debt of municipal taxes and the inclusion in the active debt generate some worrying effects. One of them is the impossibility of getting credit in loans and financing.

property loss

In more serious cases, the IPTU default can lead to a process of pledge or auction of the property to pay off the debt. This is a radical consequence and usually takes time to be realized.

First, the city must inform the owner of the risk of losing the property. The notification is an opportunity for the person to regularize the situation by paying off the debt. When this is not done, the agency can go to court with a request for attachment or auction.

The good news is that there are ways to negotiate the debt and solve the problem. Generally, municipalities offer debt installments and even discounts on interest. Thus, the negotiation can prevent the unpleasant consequences of IPTU default.

To negotiate, you must contact the sector responsible for collecting taxes in your municipality. So, just check the conditions for paying back taxes.

Frequently Asked Questions about IPTU

We have just brought you the main information about what IPTU is and how it works. To finish this full post on the subject, let’s clarify some of the most frequently asked questions about it:

Who must pay IPTU on rented properties?

Doubts about whether the landlord or tenant is responsible for paying IPTU is common and can even become controversial. But the answer is simple: although it is linked to the owner of the property, the tax collection can be passed on.

Brazilian law allows the tenant to be responsible for paying IPTU in the lease. So, when there is a delimitation, the tenant must make the payment.

However, the appearance is delicate for the owners. If the lessee does not make the payment, the debt with the city hall is not made in his name. After all, the property is tied to the owner.

How to get a duplicate of the tax?

If you own a property and have not received the payment slip from the city hall, just contact the municipality and request a duplicate.

In general, the IPTU duplicate can be issued easily and free of charge on your city’s website.

Is it possible to question the market value?

In some cases, the taxpayer has dissatisfaction regarding the market value of his property or other details of the IPTU collection. And there is, yes, a way to question them: filing an objection process with the city hall.

In many places it can be ordered online. However, there is usually a deadline to place the order, so you need to pay attention to it.

Is it better to pay in cash or in installments?

As you have seen, cash discounts are usually offered. This can be a great option to pay less property tax and not accumulate monthly financial commitments. The decision, however, is up to each taxpayer.

Be sure to consider your financial possibilities – especially the existence of other obligations at the beginning of the year – before making your decision. Always try to organize yourself financially and consider this annual expense so as not to delay the IPTU.

Now, you already know what the IPTU is, how it works and understand everything you need about this municipal tax. So, don’t forget to consider the information in this post to find out how to keep your property’s situation regular!

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