New 2022 Tax Base Changes Spain

How will ITP real estate purchase tax be calculated now?

January 2022 has become revolutionary in the real estate market, so if before the tax on the purchase of real estate was calculated based on the sale value of the property indicated in the escritura of the sale, now, regardless of the sale value of the property, the ITP taxable base will be calculated from the value indicated by the tax Valor de referencia.

One of the main innovations introduced in the new law is the inclusion of a new concept of a certain “market cadastral value – Valor de referencia”, which will be an updated tax base for such important taxes as:

– property transfer tax (ITP),

– Inheritance and gift tax (ISyD).

Thus, the taxpayer will pay tax not on the value of the house specified in the contract of sale, but on its market value, approved by the General Directorate of Cadastre.

This term should not be confused with the cadastral value of real estate, which has not changed and continues to apply for other types of taxes, such as Model 210.

What does this change mean?

How will the tax office calculate Valor de referencia?

This price will be calculated based on the sales prices of the real estate, according to the information provided by notaries and registrars. Therefore, there is no need to visit the property and, therefore, to know the state of conservation, the materials used, whether it has been renovated or not, etc.

One of the main concerns of taxpayers is whether the new price is the same cadastral value that has always been the same? The answer is NO – these are completely different concepts.

The new reference value is determined by the General Directorate of Cadastre and is based on the calculation of the price of real estate transactions by a notary and depends on the cadastral characteristics of each object. This value will be updated from year to year, simultaneously in all municipalities.

The cadastral value is calculated on the basis of the value of the respective municipality and usually takes into account:

– the location of the property,

– location within the city,

– age,

– the quality of construction, redevelopment or reconstruction of the building,

– state of preservation.

This value is updated by the budget law, although not simultaneously and unified for all municipalities.

In both cases, the cost is objective, i.e. the reference and cadastral value equally value two dwellings on the same floor of a building with the same area, even if one of them is renovated and of the highest quality, and the other is not.

In other words, these two values ​​do not take into account the specific circumstances of each property.

What taxes does it affect?

From January 1, 2022, will become the taxable base for the Property Transfer and Stamp Duty Tax (ITPAJD) and the Inheritance and Gift Tax (ISyD) as set out in Law 11/2021 on Measures to Prevent and Combat Fraud.

This means that the new cadastre value will be the minimum price you have to pay tax on when buying a home or inheriting a house. And if the taxpayer notarizes the transaction at a lower cost, the regional tax authorities will oblige him to pay tax on the value indicated in the new cadastral valuation, by means of a known cost check.

This eliminates the possibility that a taxpayer who declares a value below the newly introduced reference value may “underpay” the tax to the treasury.

But what if the value indicated in the contract of sale is higher than the newly introduced cadastral one? In this case, the state obliges to declare property for the greater of the following values:

– cadastral new value – Valor de referencia,

– the value determined or verified by the Administration for the purposes of other taxes,

– Purchase cost.

The value “determined” by the administration is the cadastral base value.

!!! The change in this tax came into force from January 2022, that is, its increase will only affect real estate purchased from January 2022.

How to appeal the reference value of the cadastre in the case of a cost check?

The base value can be challenged by requiring correction of the self-assessment submitted by the taxpayer himself, or by appealing against the calculation reported to him if he did not submit it or filed, declaring the value lower than the base.

The problem of ITPAJD law and ISyD

The reference value of the cadastre corresponds to the market value of the property. Therefore, it is the taxpayer who will have to prove and demonstrate that this value has nothing to do with the market price of the property. To do this, you can use any means of proof permitted by law.

In the case of the wealth tax, the law does not establish any mechanism for challenging the base amount. Therefore, it will be necessary to appeal this value to the ITP or to the Inheritance and Gift Tax when the property is acquired so that it does not count towards the Wealth Tax.

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