See if it is more advantageous to pay IPTU and IPVA upfront or in installments

A new year has begun and now it is necessary to check the debts and other expenses that arise. Among the obligations to pay are IPTU and IPVA.

The IPTU, Tax on Urban Property and Land, is levied on the market value of the property and is charged by the municipality. The IPVA, Tax on Motor Vehicle Ownership, is the responsibility of the state and the amount to be paid is calculated based on the market value of the vehicle.

Although there is no constant value for both cases, usually the municipality or state grants a discount for paying in cash and, thus, encourages the settlement of these taxes in a single payment.

THE CNN talked to experts to understand how to organize themselves to pay taxes and whether the best way is to pay in cash or in installments.

How to get organized to pay IPTU and IPVA

Alexandre Chaia, professor of Finance at Insper and partner at Carmel Capital explains that, as taxes are recurring annually, they must be included in the budget, as they compete with other expenses at the beginning of the year, such as school supplies and expenses with end-of-year parties or vacation trip.

“If the taxpayer decides to pay in installments, this amount must be included in a fixed bill, such as the electricity or water bill (in the case of houses) or fuel (in the case of vehicles)”, he says.

And if paying in cash with a discount, Chaia recommends that the taxpayer make savings, especially in the last months of the year, with the aim of paying taxes in a single installment.

Economics professor at Unicamp, Fernando Nogueira da Costa, reinforces that these expenses must be included in the monthly budget, or reserve the value of the 13th to pay them.

Da Costa points out that financial decisions are based on opportunity cost. Thus, when making a choice, it is necessary to check which of the two modes will bring greater benefit.

For this, it is necessary to calculate whether the discount offered on cash payment is worth it when compared to any return on investments.

“A comparison should be made with the interest rate. How much will I earn in interest if I pay in cash, that is, the value of the installment, if I leave it invested, what would be the interest in the long term”, he says.

Each state is a case

Each state will provide the payment schedule and the tax discount amount. From there, it will be possible to verify if there is a greater cost benefit in paying in cash or in installments in relation to the interest rate.

“Since the yields on short-term investments remain very low, it is very likely, but it is not a guarantee, that it is worth making anticipation for those people who have the money”, emphasizes Ricardo Teixeira, coordinator of the MBA in Financial Management at FGV.

In the case of São Paulo, for example, in January 2022, the IPVA discount was 5% and, for the IPTU, 3%, when the interest rate was lower, which “represented a good discount. However, this should be changed this year, as less than 5.20% discount makes payment in installments more advantageous”, adds Chaia.