Valuing property for tax purposes – Spain’s new reference value of the cadastre

A property’s value plays a key role in determining various tax liabilities, particularly wealth tax, transfer tax, stamp duty, and succession and gift tax.   Spain is now implementing a new method of calculating this value – the new reference value of the cadastre.

Until now, for tax purposes, real estate properties were valued based on their real value, which was assimilated to the market/acquisition value before including them in the taxable base.

However, considering the market value can fluctuate greatly, and mathematic calculations applied by the tax authorities can differ from the reality, a new valuation method called ‘reference value of the cadastre’ has been implemented.  Note that this is not the same as the ‘cadastral value’, which continues to exist, but is something new and different.

What is the new reference value of the cadastre?

The new reference value is determined by the Spanish General Directorate of the Cadastre. It is based on the calculation of prices of real estate transactions made before a notary and according to the cadastral characteristics of each property. This value will be determined year by year.

You can check the new reference value of the cadastre online at www.sedecatastro.gob.es/Accesos/SECAccDNI.aspx?Dest=3&ejercicio=2022.  It will be updated each year.

Succession and gift tax

From now on, when someone acquires property as a gift or inheritance, the value that will be included in the taxable base to calculate tax liability is either the reference value of the cadastre or the acquisition value – whichever is higher.

This means that if the reference value of the cadastre is more than you acquired the property for, tax will be due on the higher cadastre.

Wealth tax

Properties purchased before 31 December 2021 continue to be valued at the old system for wealth tax purposes.  The value you need to include on your annual wealth tax return is whichever is the highest of these three values:

• the cadastral value; or
• the value determined or verified by the Administration for purposes of other taxes; or
• the price, consideration, or value of the acquisition.

Properties acquired from 1 January 2022 onwards will be valued at whichever is highest of:

• the cadastral value; or
• the value determined or verified by the Administration for purposes of other taxes; or
• the price, consideration, or value of the acquisition; or
• the new reference value of the cadastre.

Transfer tax and stamp duty tax

From 2022, when a property is bought, the value that will need to be included in the taxable base of transfer tax and stamp duty tax will be the highest between the reference value of the cadastre and the acquisition value.

How does this impact you?

For transactions from 1 January 2022 onwards, you will need to know the new reference value of your property when submitting the relevant tax returns.

This new value will be higher than the original cadastral value, so tax liabilities on property are expected to be higher in future.

We therefore recommend you check the value of your property soon so you can take it into account when doing any tax planning.

If you disagree with the reference value of the cadastre because you consider it disproportionate and unrealistic, you can start a procedure to challenge the value. We therefore recommend comparing the acquisition value with the reference value of the cadastre and, if they are significantly different, seek the advice of a Spanish tax lawyer to challenge the reference value of the cadastre.

This new reference value of the cadastre does not affect your Modelo 720 submission as that only includes assets outside Spain.