## [COVID-19: Real estate tax (IBI) and tax on economic activities (IAE) reductions in Madrid](/pl/en_GB/new/covid-19-real-estate-tax-ibi-and-tax-economic-activities-iae-reductions-madrid)
# COVID-19: Real estate tax (IBI) and tax on economic activities (IAE) reductions in Madrid
Spain - 05 / 31 / 2020
Madrid Tax Alert
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**Madrid City Council plenary meeting approved on May 29, 2020 an amendment to the local tax laws on real estate tax and the tax on economic activities, to provide new reductions to both.**
On March 30, 2020, Madrid City Council’s government meeting approved draft instruments amending the local tax laws on real estate tax (IBI) and the tax on economic activities (IAE) to provide 25% reductions in each ([read our alert](https://www.garrigues.com/es_ES/noticia/covid-19-se-bonifican-el-ibi-y-el-iae-en-madrid-para-incentivar-el-mantenimiento-del-empleo)).
Final approval for both reductions was given by Madrid City Council at a plenary meeting held on May 29, 2020.
The main characteristics of these reductions are:
**a. Real estate tax (IBI) reduction**
Effective for 2020 only, a 25% reduction to the tax liability may be taken for properties falling within the following cadastral use classifications: “leisure and hospitality”, “commercial”, “entertainment” and “cultural”.
Where the owner of the activity is not the taxable person for the purposes of the tax on economic activities (IBI), that taxable person must substantiate that they have covenanted, in favor of the owner or of all the owners of the activity, (i) a moratorium or deferral of payment of the rent that was being paid, (ii) its reduction, or (iii) any other similar measure contributing to ensuring that the business can continue operating.
**b. Tax on economic activities (IAE) reduction**
Also effective for 2020 only, a 25% reduction to the liability for the tax has been allowed for taxable persons carrying on any of the activities set out in the local tax law, which include the following types: artistic, commercial, leisure and restaurant services, hospitality, travel agency, medical scientific research, leisure and cultural services (including sports events and sports facilities), leisure parks and other entertainment services.
A 50% reduction is available where the taxable person has fewer than ten employees as of March 1, 2020.
The 25% reduction may also be claimed in 2021 if, besides meeting the requirements laid down for 2020, the average number of employees as of December 31, 2020 has not fallen since the beginning of 2020 (or the start of operations if this took place between January 1 and March 15 2020).
Moreover, a few **additional requirements** are specified for the reductions to be claimable:
- The property or economic activity must first have been classified as one of special interest or local benefit. To obtain this classification a standard application form must be filed for approval by the plenary meeting of the municipal corporation, within 30 calendar days from May 30, 2020. The plenary meeting must issue the classification before July 31, 2020.
- The activity must have been carried on since before March 15, 2020 and will have to continue until December 31, 2020.
- The reductions are not claimable by any entities having their tax domicile in tax havens.
- To substantiate satisfaction of the requirements, a solemn declaration must be produced.
The head of the Madrid tax agency will grant the reductions provisionally, subject to later verification of satisfaction of the requirements.
[Tax](/pl/en_GB/tags/tax), [Spain](/pl/en_GB/tags/spain), [Madrid](/pl/en_GB/tags/madrid)
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