First conclusions on the cadastral value as a reference value

At Illeslex Abogados we are specialists in real estate law in the Balearic Islands. In this post we explain that the new valuation system increases by 17% the taxation on the purchase and sale of second-hand properties.

On 11 July 2021, Law 11/2021 on measures to prevent and combat tax fraud, popularly known as the "Anti-Fraud Law", came into force.

Among the set of measures contained in the aforementioned law, the establishment of the so-called reference value is of particular relevance. This is a value calculated by the Cadastre, and updated annually in its electronic headquarters, which has replaced the real value as the taxable base for the calculation of Inheritances and Donations Tax and the Property Transfers Tax.

As we explained in the publication of 11 November 2021, since the coming into force of the regulation, Inheritances and Donations and Property Transfers taxes are no longer calculated on the basis of the actual value, but on the basis of the reference value. In this way, the regulation established an objective value that, among other things, brought an end to the tax authorities' verification, which had caused so many difficulties.

Well, one year after the entry into force of the regulation, and six months after the new valuation system came into force, we now have the first data on the economic consequences of this measure.

The National Federation of Real Estate Associations (FAI), based on surveys of 427 real estate agencies throughout Spain, has carried out a study on the economic impact of this new valuation system.

The study shows, among other things, that 76.1% of the real estate agencies surveyed have been involved in sales and purchases whose market reference value from the Spanish Cadastre has been higher than the actual transfer value in the deeds and that the increase has occurred in 19% of these.

In line with this, the Federation concludes that for taxation purposes, the establishment of the new cadastral reference value as the taxable base for the Inheritances and Donations Tax and the Property Transfers Tax, on average, increases the taxation of second-hand purchases and sales by 17.11% above their real market value.

The Federation is categorical: the new system means an "unfair and new tax burden" for buyers, and the reference value established by the regulation does not match market parameters. For this reason, the Federation calls for a review of the new system for calculating cadastral value to bring it into line with market reality.

Regardless of what happens in the future with the calculation system, the new regulations and the consequences of various kinds that derive from them must be taken into account when undertaking any real estate transaction.

Pedro Pérez-Cuesta Llaneras
Illeslex Lawyers

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