When it comes to purchasing a property in Spain, this transaction is subject to taxes, the amount of which is determined by a “value” of the property being transferred. This value must be adjusted to the most objective criteria possible for the payment of the corresponding taxes. Our lawyer specialized in property sales and purchases, Félix Ruiz, explains what is meant by the reference value of a property in Spain.
What is the reference value of a property in Spain?
For the purpose of determining how much is to be paid for both Transfer Tax and Stamp Duty and Inheritance and Gift Tax in Spain, on numerous occasions, the determination of this “real value” has been the subject of controversy and litigation.
In this sense, the Spanish Supreme Court has established as a jurisprudential doctrine that when there is a market for the goods in question, the “real value” coincides with the “market value”.
In addition, the Supreme Court has also determined that the method of verification by means of the estimation of cadastral values, multiplied by indexes or coefficients, and taking into account the municipality where the real estate is located (the famous “tax value”), is not the most appropriate. This resolution is based on its generality and lack of relation to the specific property in question, unless such a method is accompanied by a verification activity of that property in Spain, which greatly hampers the Spanish Tax Agency’s verification capacity.
Law 11/2021 of 9 July on measures to prevent and control tax fraud, transposing Council Directive (EU) 2016/1164 of 12 July 2016 establishing rules against tax avoidance practices that directly affect the functioning of the internal market, amending various tax and gambling regulation rules. It establishes that for the payment of taxes relating to the acquisition of real estate, the “reference value” provided for in the Law on Real Estate Cadastre will be used, replacing the generic term “real value”.
How the reference value of a property is established in Spain?
It will be the Directorate General of Cadastre that will determine objectively and with the limit of the market value, from the data in the Cadastre, the “reference value” of a property in Spain. This is obtained as a result of the analysis of the prices reported by public notaries in the sale and purchase of real estate.
In this sense, in the transfer of real estate, if the value of the property declared by the interested parties, the price or consideration agreed, or both, are higher than the “reference value”, the higher of these magnitudes will be taken as the taxable base.
When there is no “reference value” or this cannot be certified by the General Directorate of Cadastre, the taxable base, without prejudice to administrative verification, will be the higher of the following values:
– The value declared by the intervening parties
– The agreed price or consideration
– Market value.
The “reference value” of a property in Spain will be the minimum taxable base for Transfer Tax and Stamp Duty (ITP and AJD) and Inheritance Tax.
Where to check the reference value of a property in Spain
The “reference value” can be consulted via the page of the Cadastre’s Electronic Headquarters: www1.sedecatastro.gob.es, where the reference value of a property on a certain date can be certified. To access the consultation, taxpayers must identify themselves by means of their National Identity Document, with a digital certificate or digital signature.
From Welex, lawyers and accountants in Marbella, we encourage you to contact our lawyers specialized in property sales in cases where you have doubts about the “reference value” of the property in Spain that you wish to purchase. Send us an IBI receipt showing the Cadastral Reference and our law firm will manage the consultation for you.
Reference value of a property in Spain. Practical case study
In the following, from Welex lawyers in Marbella, we are pleased to illustrate step by step how to obtain the Reference Value. We will explain the process from a practical point of view using examples and we will inform you why we should always take into account the Reference Value when buying a property in Spain.
Local Property Tax (IBI) rates in Spain
The Tax on Real Estate (IBI) is a tax framed in the Local Spanish tax system. It management is shared between the State Administration and the Town Councils and the tribute is collected by each Town Hall for the properties on its municipality.
Tips about property conveyancing in Spain
It is imperative to get to know the area before you choose a property. You should visit a number of different locations in order to make an educated decision. Additional research into similar properties in various areas will give you different perspectives of what you cananticipate in terms of price.
I want to buy a property in Spain, what should I do?
According to Félix Ruiz, an expert conveyancing lawyer in the sale of real estate in Spain, sometimes it happens to find people who choose not to have the services of a professional specialized in the purchase and sale of real estate in Spain getting them wrapped in a legal nonsense from which they find it difficult to get out.