Applying the new real estate market reference values
By Armin Gutschick & Anja Sämann-Gutschick
Since the beginning of 2022 there have been significant changes in the valuation of real estate, which have a direct impact on the real estate transfer tax, inheritance tax and wealth tax. Now the real estate market reference value (“Valor de Referencia del Mercado Inmobiliario”) is applied as the minimum value in the event of a property transfer. If the tax calculation is based on this reference value, there is no further checking by the authorities. This is intended to avoid the legal disputes that arose under the old procedure when the cadastral value for the valuation of real estate was often felt be insufficient. Now the value check (“comprobación de valores”) by the Balearic tax authorities, that used to be imminent after a transfer, is no longer necessary.
Beginning this year, the market reference values will be determined annually by the central cadastral authority ("Dirección General de Catastro"), based on the purchase prices communicated by notaries and land registries.
These values are determined at the end of each year for use in the following calendar year. However, for the current year 2022, the market reference value has already been implemented in some parts of Ibiza (e.g. areas of the municipality of Sant Josep), as well as in rural areas of Ibiza and Formentera ("suelo rústico"). Where there is no reference value then a market value must be determined. So far this has been done in the Balearic Islands using the cadastral value as a basis on the website of the Balearic Tax Authority.
The notary will use the reference value for every property transfer, regardless of whether it is an inheritance, gift or purchase contract. When inheriting shares in a company that owns a property, the basis for valuation will also now be the reference value.
With the help of the digital signature (“firma electrónica”) you can find out the current value of a property on the website of the Cadastral Office:
https://www1.sedecatastro.gob.es/Accesos/SECAccvr.aspx The information is available in Castellano, Catalan and English. Click ‘start’ (house icon upper left) and this will take you to the main page of the central cadastral office. There is a red box called "valor de referencia" at the top right. You can get the reference value of the property from that link, but you will need to specify the cadastral number of the property.
If the reference value is higher than the purchase price stated in the deed, then the burden of proof lies with the taxpayer. The buyer/heir can either pay the tax according to the higher reference value and then appeal, or pay according to the lower purchase price, thus risking a tax assessment with fines (which he has the right to object to). In order to avoid fines, we think it is advisable to include the reference value of the property in the deed, and pay the tax accordingly. If the reference value is higher than the agreed purchase price and the property is in a state of disrepair, for example, then extensive evidence should be secured before inheritance or purchase, to support your claim of a lower purchase price. This includes a valuation report by a technical architect, videos showing the condition of the property and a notarial record stating the current condition of the property at the time of the purchase. Once the taxes have been paid, the taxpayer can attempt to reclaim the overpaid taxes by challenging the market reference benchmark.
With regard to the wealth tax, because the use of the reference value only came into force on 1st January, 2022, then only those transfers that have taken place after that date are affected. Since there is now an annual adjustment of the reference value for real estate, the wealth tax must also be adjusted annually. Incidentally, the assessment base for wealth tax purposes has recently been increased to include all of the ancillary costs that arose during the acquisition of the property. This includes any land transfer taxes, value added taxes, stamp duties, notary fees and land register costs! Any objection to the use of the reference value for the wealth tax, must already be lodged at the time of acquisition.
After that there is no longer any possibility of objection to the wealth tax, which is not due until the following year.
Finally, some good news: The reference value is not applicable to the municipal property tax. It also does not generally affect the municipal capital gains tax (“Plusvalia”). In these matters the evaluation basis remains the municipal cadastral value.