A new value has been established to determine the market value in real estate transactions and/or possession (presumption of market value), as per Law 11/2021 of July 9th. As a matter of facts, this implementation changes tax rates. Even if the transaction is not carried out for that amount, the administration will apply the new rules. This will affect most Spanish real estate. For tax purposes, the taxable base or value of the property, the aforementioned "Cadastral Reference Value" will apply; in short it means that the assets will be subject to paying more taxes.
Specifically:
Nevertheless, the General Directorate of Cadastre uses the authorities’ platform to announce several aspects that must be taken into account, such as:
Firstly,
What is the reference value of a property?
Here the directive states that it is the value determined by the General Directorate of Cadastre, as a result of the analysis of the prices of all real estate sales and purchases made before a notary public, depending on the cadastral characteristics of each property. In principle, the reference value will not exceed the market value. For this purpose, a reduction factor is applied in its determination.
How does the reference value affect the cadastral value and the property tax?
The land registry states that the reference value does not affect the current cadastral value in any way. Therefore, it has no effect on the Real Estate Tax. Nor does it have any effect on the rest of the taxes that have the cadastral value as a taxable base.
What is the function of the reference value and what taxes does it affect?
In addition to its descriptive function, the reference value of each property will serve as the taxable base for Inheritance Transmissions and Documented Legal Acts Tax (ITP and AJD) and Inheritance and Donations Tax (ISD).
Therefore, when a transfer of a property is subject to one of these taxes, the reference value of the property will be the taxable base for the corresponding tax.
However, if the declared value, the price or the consideration paid is higher than the reference value of the property, the higher of these figures will be taken as the taxable base.
Thus, the reference value of the property will be the minimum taxable base for these taxes.
So, how does it affect Wealth Tax?
It clarifies, among other aspects, that the new reference value can only affect Wealth Tax with regard to properties acquired after January 1st, 2022. Under no circumstances will it affect pre-existing assets. It also indicates that the individualised reference values will be available through the platform of electronic services of the Cadastre in 2022, once the procedure for their determination has been processed, in accordance with the statutory law of the third final provision of the revised text of the Law on Real Estate Cadastre.
Finally, when the reference value has been the taxable base in the tax levied on the acquisition of a property, the rule for determining the taxable base of the Wealth Tax to which, where applicable, will apply. Therefore, the reference value may only affect Wealth Tax with regard to properties acquired after January 1st, 2022. It will - in no way - affect pre-existing assets.
What are the differences between the cadastral value and the reference value of urban properties?
The cadastral value of real estate is updated, where applicable, by the General State Budget Laws. This serves as the taxable base for Real Estate Tax. It is protected data and is therefore not published. It is revised, in the case of urban properties, within the framework of collective valuation procedures.
The reference value of urban properties will be determined year by year, simultaneously in all districts. This will serve as the taxable base for the taxes on property transfers and documented legal acts, and on inheritance and donations. It will not be protected, and will be permanently published in the Electronic Headquarters of the Cadastre.
How is the reference value of real estate determined?
The reference value of real estate will be determined, year by year, by the application of average value modules, based on the prices of all real estate sales and purchases actually carried out before a notary or filed in the Land Registry, and obtained in the framework of the annual real estate market reports prepared by the General Directorate of Cadastre.
These modules will be assigned to representative real estate products by areas of the territory called homogeneous territorial areas of valuation. These will correspond to the average purchase and sale prices.
Urban real estate
In the case of urban real estate, the Directorate General of Cadastre will calculate the reference value of a specific real estate on the basis of the average value module applicable in the area in which it is located, taking into account the differences in categories, age and state of conservation between this real estate and the representative real estate product to which the module refers. For this purpose, the cadastral valuation regulations shall be used, on a transitional basis.
Rural real estate
In the case of rural properties without construction, the reference value will be calculated on the basis of the average value module, depending on their characteristics, and the corrective factors for location, agronomic and socio-economic factors that are determined in the corresponding annual report on the real estate market.
In any case, in order to ensure that the reference values do not exceed the market values, the reduction factors determined by Ministerial Order will be applied.
Where and how can I find out the reference value of my property on a given date?
The individualised reference values will be available in the Electronic Headquarters of the Cadastre in 2022, once the procedure for their determination has been processed, in accordance with the provisions of the third final provision of the revised text of the Law on Real Estate Cadastre.
Likewise, from 2022 onwards, reference values will be provided through the Cadastre Hotline (telephone numbers 91 387 45 50 and 902 37 36 35). Also in the Cadastral Management “Gerencias del Catastro”. These may be consulted by prior request for an appointment at the aforementioned telephone numbers.
The Electronic Headquarters of the Cadastre will offer the possibility of consulting and certifying the reference value of a property at a given date.
In addition, cadastral titleholders will be able to obtain a certificate of motivation of the reference value at a given date. In this way, they will have all the data and technical elements used for its determination.
What can I do if I do not agree with the reference value of my property?
When the reference value is used as the taxable base for Transfer Tax and Stamp Duty or Inheritance and Gift Tax, you can challenge it before the corresponding Tax Administration, during rectification of your self-assessments or the presentation of appeals against the settlements that may be made, as the case may be.
Furthermore, at any time, in the event of disagreement with the descriptive data of the property in the Cadastre, the cadastral procedures for incorporation or revision provided for in the regulations (correction of discrepancies, rectification of errors, etc.) may be initiated before the General Directorate of the Cadastre.
In order to ensure that the reference value of real estate does not exceed the market value, Order HFP/1104/2021, of October 7th, established a market reduction factor for assets of the same class. According to the provisions of this Order, it is applicable for the determination of the reference values of real estate, establishing a reduction factor for both urban and rural real estate, which in both cases is 0.9. In other words, the reference value calculated by cadastre will be reduced by 10%, to be understood as market value, in order to minimize the tax impact on property transactions.
If you are in the process of buying or selling a property, contact us. Our Tax Advice Department will be pleased to assist you.
