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The new Cadastre reference value is now operational. As of January 1st 2022, the taxable base for important taxes such as the Property Transfer Tax (ITP, in Spanish).

In other words, it is the key to determining how many taxes required to pay for the purchase of a house. 

This change was included in the Fraud Prevention Act approved in July 2021, although its implementation was postponed until 2022.
 
Following the modification, the taxable base is no longer the “real value” which has caused so many headaches for the Spanish Treasury in recent times, but is now the ‘market value’, which is determined by the Cadastre reference value.

Nuevo valor de referencia catastralIn other words, in the case of properties acquired since 1st January 2022, taxpayers must declare the Cadastre reference value for their tax filings.

How do I settle my taxes?

However, if the deed value is higher than the reference value, the deed value will be the taxable base depending on the situation (ITP for the purchase of existing homes (not new construction) or the Inheritance Tax for inheritances and donations).

Undervalued properties can lead to tax inspections and even penalties for the taxpayer.

In the event that the taxpayer believes that the reference value does not correspond to the market value, he/she must appeal and prove it to the tax authorities.

Therefore, the burden of proof lies with the citizen. To this end, they can provide valuations of the property, photographs or a notarial deed that proves the actual state of the property.The arrival of this change is generating uncertainty, especially because not all properties have been ‘assigned’ this new reference value.

In such a case, as taxpayers are only required to pay taxes on the «market value», they can rely on the deed value.

Then, it will be the Treasury department that must demonstrate that the deeded value does not correspond to the market value if it does not agree with what the taxpayer has declared.

Conclusions

The implementation of the new Cadastre reference value in Spain brings significant changes to property taxes, particularly for purchases, inheritances, and donations. Here’s a summary of the key points and what to do next:

1. Taxable base shift: Instead of the previously contested «real value,» the «market value» determined by the Cadastre reference value will now be the primary basis for calculating taxes like the Property Transfer Tax (ITP).

2. Deed value still holds weight: If the deed value exceeds the reference value, it serves as the taxable base in certain situations. However, be wary of undervaluing properties to avoid inspections and penalties.

3. Challenging the reference value: If you believe the reference value doesn’t reflect the true market value, you can file an appeal with evidence like valuations, photos, or a notarial deed. Remember, the burden of proof lies with you.

4. Uncertainty around unassigned values: If your property lacks a reference value, rely on the deed value for tax purposes. The onus is on the Treasury to challenge your declaration if they deem it inaccurate.

5. Stay informed: This new system is still evolving, so stay updated on potential future changes and consult with a tax advisor for specific guidance.

By understanding these key points and taking necessary steps, you can navigate the new Cadastre reference value system and ensure accurate tax assessments for your property transactions.