If you are going to buy or inherit a property in Spain, these are the two words you should remember: reference value.
From January 2022, the Tax Authorities, through the General Directorate of Cadastre, have determined a new value, apart from the cadastral value, called the Reference Value of the Cadastre, which since the beginning of 2022 has been the taxable base for settling various taxes linked to the purchase, inheritance or gift of a property.
That is to say, since 1 January 2022, there has been a change in the minimum base from which the payment of these taxes is calculated, a change that only affects residential properties or rustic properties without construction.
1. What is the reference value?
“A value that is objectively determined for each property on the basis of the data in the Cadastre and that corresponds to the most likely price for which a property could be sold between independent and unencumbered parties”. In other words, it is an estimate of the sale price of a property determined under normal market conditions, but which will never exceed the market value.
The reference value is, since 1 January 2022, the minimum taxable base for transfer tax and stamp duty (ITP and AJD) as well as for inheritance and gift tax (ISD).
And what is the difference from the previous regime? Basically, what changes is the minimum base. The base, in the end, will be the higher of the market value, the declared /agreed value or the reference value.
2. Who is affected?
It affects those who are going to buy a second-hand house, as well as those who have inherited or received a property as a gift.
It does not affect, however, either the real estate or property tax (IBI), or the tax on the increase in value of urban land (IIVTNU), better known as municipal capital gains tax or “Plusvaía”.
3. Which taxes?
There are three (3) taxes whose regulations have been modified to adapt them to the application of the reference value:
- The transfer tax (ITP). In order to determine the taxable base in the case of real estate transactions, the reference value must be declared, unless a higher amount is declared or the price or consideration is higher.
- Inheritance and gift tax (ISD). As in the case of transfer tax, the minimum value to be declared is the reference value, unless the taxpayer chooses to declare a higher value.
- Wealth tax (IP). In accordance with its regulations, property must be declared at the higher of the following values: (i) the cadastral value, (ii) the value determined or verified by the Administration for the purposes of other taxes, or (iii) the price, consideration or value of the acquisition. In accordance with the above, it is understood that the value verified by the Administration is deemed to be the reference value.
4. Can I challenge the reference value if I do not agree?
Yes, but the rules state that a challenge to the reference value can only take place when it has a tax effect, that is, it is not revised at the beginning, the affected tax is first paid and then challenged.
5. Where can I check the reference value?
The new reference values for urban properties with residential use, as well as for rustic properties without construction, for the year 2023 are already published in the Cadastre and the values for 2022 are also available for consultation on the website.
If you want to know the reference value of the property you plan to buy, sell or inherit, do not hesitate to contact us and we will be happy to assist you.
This publication contains information of a general nature, it does not constitute professional opinion or legal advice.
Categorised in: Spanish Law
This post was written by Pilar Cerrutti