Who pays the municipal tax in the sale of a car?

The municipal tax on the purchase and sale of a car, also known as the Tax on Mechanically Traction Vehicles (IVTM), is a topic that generates many doubts among buyers and sellers. This mandatory tax affects all vehicle owners and can have a significant impact on buying and selling transactions. In this comprehensive article, we will explore who is responsible for paying this tax, how it affects vehicle transactions, and what factors both buyers and sellers should consider.

Article Content

1. What is the Circulation Tax?

2. Characteristics of the IVTM

3. Who should pay the tax?

4. Payment of the IVTM in the purchase and sale of a car

5. Factors that influence the cost of the tax

6. Vehicle transfer process

7. Consequences of not paying the IVTM

8. Management software for dealers

9. Frequently asked questions about the IVTM

10. Recommendations for buyers and sellers

11. Recent changes in IVTM legislation

12. Useful resources for more information

What is the Circulation Tax?

The Circulation Tax, officially known as the Tax on Mechanically Traction Vehicles (IVTM), is a mandatory tax that applies to all motor vehicles that circulate on public roads. This tax is managed by local governments and is part of municipal revenues, meaning that its collection is intended to improve and maintain local infrastructures.

The IVTM is established as a form of contribution by vehicle owners to the maintenance of road infrastructures and services related to traffic in each municipality. It is an annual tax that must be paid regardless of the use of the vehicle, meaning that even cars that spend most of their time parked are subject to this tax.

The legal basis of the IVTM is found in Royal Legislative Decree 2/2004, of March 5, by which the consolidated text of the Regulatory Law of Local Finances is approved. This regulation establishes the general principles of the tax, although each municipality has some flexibility to determine specific rates within the limits set by law.

It is important to note that the IVTM is different from other vehicle-related taxes, such as the Registration Tax or the Tax on Property Transfers, which are paid once when acquiring a new or used vehicle, respectively.

Characteristics of the IVTM

The Tax on Mechanically Traction Vehicles has several important characteristics that define it and differentiate it from other taxes:

1. It is a municipal tax: Each municipality is responsible for its management and collection, which means that rates and conditions can vary from one municipality to another. This can lead to situations where the same model of car pays different amounts depending on the locality where it is registered.

2. It is a direct tax: It applies directly to the ownership of the vehicle, without intermediaries. This means that the vehicle owner is directly responsible for its payment to the local administration.

3. It is a real tax: It taxes the ownership of the vehicles, regardless of the owner's personal circumstances. Factors such as income or family situation of the vehicle owner are not taken into account.

4. It is a mandatory tax: All vehicle owners must pay it, except for some specific exceptions established by law, such as official vehicles, ambulances, or vehicles for people with reduced mobility.

5. It is paid annually: The tax is due on January 1 of each year, although many municipalities offer the possibility of dividing it into several payments to facilitate its payment by taxpayers.

These characteristics make the IVTM a tax that requires special attention from vehicle owners, especially in purchase and sale situations. Efficient management of car sales can help avoid confusions and problems related to the payment of the IVTM during the transaction process.

Who should pay the tax?

The responsibility for paying the IVTM falls on the vehicle owner. According to current regulations, the taxpayer of the tax is the individual or legal entity in whose name the vehicle is registered in the circulation permit. This means that the official owner of the vehicle is the one who must pay the tax, regardless of who actually uses the vehicle.

It is important to note that the tax is paid in the municipality where the vehicle has its tax address as of January 1 of the current year. This tax address must match the municipality where the vehicle owner is registered. This can create complex situations in cases of moving or changes of residence.

In the case of company vehicles or leasing, the responsibility for payment may vary depending on the agreements established, but it generally falls on the owning company or the financial entity, respectively. However, it is common for leasing contracts to stipulate that the final user of the vehicle is the one responsible for the payment of the IVTM.

It is crucial to consider that the responsibility for paying the IVTM does not automatically transfer with the sale of the vehicle. Until the transfer process is completed and the circulation permit is updated, the seller remains the official owner and thus the legal responsible for paying the tax.

Payment of the IVTM in the purchase and sale of a car

In the context of the purchase and sale of a vehicle, the question of who should pay the IVTM can generate confusion. The general rule is that the owner of the vehicle as of January 1 is the one who must pay the corresponding tax for that entire year, regardless of whether they sell the vehicle later.

If the sale occurs after January 1, the seller is responsible for paying the IVTM for that year. However, it is common for the sale agreement to include a tax proration clause, where the buyer agrees to reimburse the seller the proportional part of the tax corresponding to the period in which they will be the new owner.

It is important to note that, even if the sale has been made, until the vehicle transfer process is completed and the circulation permit is updated, the seller remains the official owner and, therefore, the legal responsible for paying the tax.

To avoid problems, it is recommended to:

1. Clearly agree on who will be responsible for paying the IVTM in the purchase agreement.

2. Complete the vehicle transfer as soon as possible after the sale.

3. Keep all documents related to the transaction and tax payment.

Factors that influence the cost of the tax

The cost of the IVTM can vary significantly depending on several factors. The main elements that influence the amount to be paid are:

1. Municipality: Each municipality establishes its own rates within the limits set by law. This can result in noticeable differences between municipalities, even for identical vehicles.

2. Type of vehicle: The tax rate varies according to the vehicle category (car, van, truck, motorcycle, etc.). Generally, larger or commercial-use vehicles tend to have higher rates.

3. Fiscal power: In the case of cars, the rate is calculated based on the fiscal horsepower of the vehicle. The higher the power, the higher the tax. This factor is especially relevant for sports cars or high-end vehicles.

4. Age of the vehicle: Some municipalities offer bonuses for historic vehicles or those of certain ages. These bonuses can reach up to 100% of the tax in some cases.

5. Type of fuel: Many municipalities apply reductions for electric or low-emission vehicles as part of environmental policies. This can represent significant savings for owners of eco-friendly vehicles.

6. Use of the vehicle: Some municipalities offer bonuses for vehicles used professionally or for public transport.

It is important to consider these factors when buying used cars, as they can significantly affect the total cost of vehicle ownership. An apparently cheap car could end up being more expensive in the long run if it has a high IVTM.

Vehicle transfer process

The vehicle transfer is a crucial step in the purchase and sale that directly affects the payment of the IVTM. This process involves the official change of ownership of the vehicle and must be completed within a maximum of 30 days from the date of purchase. The general steps for the transfer are:

1. Sign the purchase contract between the parties.

2. Pay the Tax on Property Transfers (if applicable).

3. Go to the Provincial Traffic Headquarters with the necessary documentation:

   • ID or residence card of the buyer and seller

   • Vehicle circulation permit

   • Vehicle technical sheet

   • Purchase contract

   • Proof of payment of the Tax on Property Transfers

   • Proof of payment of the transfer fees

4. Complete the ownership change in the DGT registry.

5. Obtain the new circulation permit in the buyer's name.

It is essential to complete this process for the new owner to officially assume the responsibility of paying the IVTM. Until the transfer is completed, the seller remains legally responsible for the vehicle and its tax obligations.

The implementation of management software for dealerships can greatly facilitate this process, helping to maintain an accurate record of transactions and ensuring that all steps are completed correctly and on time.

Consequences of not paying the IVTM

Failure to pay the IVTM can have serious consequences for the vehicle owner. Some possible repercussions are:

1. Fines and surcharges: The municipality may impose fines and apply surcharges on the original amount owed.

2. Seizure: In extreme cases, the administration may proceed to seize assets or bank accounts to collect the debt.

3. Inability to carry out procedures: Being behind on the payment of the IVTM can prevent the completion of certain administrative procedures related to the vehicle.

4. Problems in the sale of the vehicle: The existence of outstanding debts can complicate or even prevent the sale of the vehicle.

5. Legal liability: In the event of accidents or violations, the owner listed in the registry will be the legal responsible, even if they have already sold the vehicle but have not completed the transfer.

To avoid these situations, it is crucial to stay up to date with the payment of the IVTM and ensure that the ownership of the vehicle is always updated.

Management software for dealerships

In the context of the buying and selling of vehicles and the management of the IVTM, the use of specialized software for dealerships can be very helpful. A comprehensive management system like DealCar offers numerous advantages:

1. Inventory management: Allows for precise control of vehicles in stock, including information about their tax status.

2. Process automation: Facilitates the generation of necessary documentation for the buying, selling, and transfer of vehicles.

3. Payment tracking: Helps maintain a record of tax payments associated with each vehicle.

4. Alerts and reminders: Can be set up to send notifications about important dates, such as IVTM payment deadlines.

5. Integration with administration systems: Facilitates communication with the DGT and municipal platforms to expedite procedures.

6. Cost analysis: Allows calculation of the total cost of ownership of vehicles, including taxes like the IVTM.

The implementation of management software not only improves the operational efficiency of the dealership but also helps prevent errors and omissions in managing taxes and legal documentation.

Frequently asked questions about the IVTM

1. What happens if I buy a car in the middle of the year? The seller will have paid the IVTM for the entire year. It is common to agree on a prorated sharing of the tax between the buyer and the seller.

2. Can I pay the IVTM in installments? It depends on the municipality. Many offer the option to split the payment.

3. Are there exemptions to paying the IVTM? Yes, there are exemptions for official vehicles, ambulances, vehicles for people with reduced mobility, among others.

4. What happens if I move to another municipality? You must notify the change of address to the DGT. The IVTM will be paid in the new municipality starting the following year.

5. How does the IVTM affect company vehicles? Companies must pay the IVTM for each vehicle registered in their name, although they can deduct it as an expense in the Corporate Tax.

Recommendations for buyers and sellers

For buyers:

1. Research the cost of the IVTM in your municipality before purchasing.

2. Agree with the seller on how the payment of the current year's IVTM will be handled.

3. Complete the vehicle transfer as soon as possible.

For sellers:

1. Ensure you are up to date with the payment of the IVTM before selling.

2. Include a clause about the IVTM in the purchase contract.

3. Don't forget to notify the DGT of the sale to avoid future liabilities.

Recent changes in IVTM legislation

The legislation regarding the IVTM is subject to periodic changes. Some of the recent changes or trends include:

1. Eco bonuses: Many municipalities are increasing bonuses for electric or low-emission vehicles.

2. Digitalization: There is progress towards the electronic management of the tax, facilitating online payment.

3. Harmonization: There are proposals to harmonize the rates among municipalities, although they have not yet been implemented.

4. Linking to emissions: Some municipalities are considering linking the amount of the IVTM to vehicle emissions, not just to its power.

It is important to stay informed about these changes, as they can significantly affect the cost of owning a vehicle.

Useful resources for more information

For updated and detailed information on the IVTM, it is recommended to consult:

1. The official website of the General Directorate of Traffic (DGT).

2. The website of the corresponding municipality.

3. Consumer and user associations, such as the OCU.

4. Tax advisory firms specializing in automotive issues.

   
   

In conclusion, the payment of the IVTM is an important responsibility in vehicle ownership that should not be overlooked in the buying and selling process. Both buyers and sellers must be well informed about their obligations to avoid legal and financial problems. With the right information and appropriate management tools, handling the IVTM can be efficiently integrated into vehicle sales operations.