IBI and IAE 2026: tax compensation for municipalities with floods in Andalusia and Extremadura

Key data

Municipalities in Andalusia and Extremadura affected by floods and other catastrophic events are guaranteed state compensation for the tax benefits they have applied in IBI and IAE during the 2026 tax year. The Resolution of April 14, 2026 from the General Secretariat for Regional and Local Financing establishes the specific procedure for municipalities to prove the amounts not collected and receive the corresponding transfer from the State.

The measure protects municipal treasury: without this compensation, applying the exemptions and reductions provided for in disaster regulations would mean a direct reduction in local government revenues. With this mechanism, municipalities can apply tax benefits without bearing the cost.

What does this regulation establish?

The resolution regulates the compensation procedure by which the State reimburses affected municipalities for the revenues they have ceased to receive by applying tax benefits in two local taxes:

• IBI (Property Tax): exemptions or reductions applied to owners of properties damaged by floods or other catastrophic events.
• IAE (Business Activity Tax): tax benefits applied to companies and self-employed individuals whose economic activity has been harmed by the same events.

The territorial scope is limited to municipalities in Andalusia and Extremadura. The affected tax year is exclusively 2026.

The mechanism works in two steps:

1. The municipality applies tax benefits (exemptions or reductions) to taxpayers who have requested them following natural disasters.
2. The municipality proves to the State the amounts not collected and receives the equivalent economic compensation.

The reference regulations for applying these benefits are the current legislation on disasters, which already provided for these exemptions. This resolution regulates the administrative procedure so that compensation effectively reaches local governments.

Economic and operational impact

The economic impact of this resolution operates at two distinct levels:

For municipalities: the resolution eliminates the risk of reduction in municipal tax revenues. Without this mechanism, applying IBI and IAE exemptions would mean a direct loss in the local budget. With state compensation, the municipal treasury remains neutral: it does not collect the tax from the affected taxpayer, but receives the equivalent amount from the State.

For affected taxpayers: the impact is positive. Exemptions and reductions in IBI and IAE represent real tax savings in the 2026 tax year. A property owner whose building was damaged by floods may be exempt from paying IBI for that year; a company with interrupted activity may obtain a reduction in its IAE quota.

Operationally, the management burden falls on municipalities, which must:

• Record and document the tax benefits applied to each taxpayer.
• Calculate the amounts not collected in IBI and IAE.
• Submit the proof to the General Secretariat for Regional and Local Financing to receive compensation.

Who does it affect?

• Municipalities in Andalusia and Extremadura whose municipal areas have been affected by floods or other catastrophic events and have applied or must apply tax benefits in IBI and IAE for the 2026 tax year.
• Property owners (individuals and companies) in affected municipalities who have requested exemption or reduction of IBI due to damage caused by floods.
• Companies and self-employed individuals with economic activity in affected municipalities who have requested tax benefits in IAE for the same reasons.
• Managers and technicians of local governments responsible for processing the proof of amounts and the compensation request to the State.
• Tax advisors and management firms that advise taxpayers or municipalities in affected municipalities.

Practical example

A municipality in Extremadura whose area was affected by floods in 2025-2026 has applied IBI exemptions to 150 owners of damaged homes and premises, and reductions in IAE to 30 companies with interrupted activity.

Without state compensation, that municipality would have ceased to receive the total amount of those quotas, with the consequent impact on its municipal budget. With the procedure established by this resolution, the municipality documents the amounts not collected (for example, the total of exempt IBI quotas plus the IAE reductions applied), submits the proof to the General Secretariat for Regional and Local Financing, and receives the equivalent compensation from the State.

The result for the affected taxpayer is the same in both cases: they do not pay IBI or pay a reduced IAE quota in 2026. The difference is that the municipality does not bear that cost from its own budget.

What should municipalities and taxpayers do now?

1. Municipalities: identify taxpayers with tax benefits applied. Review the IBI register and IAE census to locate all cases where exemptions or reductions have been applied due to catastrophic events in 2025-2026 in the 2026 tax year.
2. Municipalities: calculate and document the amounts not collected. Quantify the total of IBI and IAE quotas not collected as a result of tax benefits applied. This documentation is the basis for the compensation request.
3. Municipalities: submit the proof to the General Secretariat for Regional and Local Financing. Follow the procedure established in the resolution to receive the state compensation corresponding to the 2026 tax year.
4. Affected taxpayers: verify that the municipality has processed your tax benefit. If you requested the exemption or reduction of IBI or IAE due to flood damage and have not received confirmation, contact your municipality's local government to ensure the benefit is applied in the 2026 tax year.
5. Advisors and management firms: inform clients in affected municipalities. Review whether any client has properties or economic activities in municipalities in Andalusia or Extremadura affected by floods and check if they have requested the corresponding tax benefits.