One of the tax novelties as of January 2022 was brought in by the Law 11/2021 dated 9 July, as a means to prevent and combat tax fraud, and the transposition of the EU Directive 2016/1164, which includes the so-called “reference value” as criterion to determine the taxable income for taxes on Property Transfers and Documented Legal Acts, Inheritance Taxes and Taxes on Donations, and Property Taxes.
What is the reference value?
The reference value is determined by the General Property Directorate (Dirección General del Catastro) after analysis of the prices of all the property sale/purchase transactions that took place before a notary public, having in account the information about each building appearing in the real estate register. The reference value of a building is one of the economic characteristics that appear in the description in this registry.
How does the reference value affect the rateable value? And how does the reference value affect the Property tax?
The reference value has no effect at all on the present rateable value. It has no effect on the Property Tax, and neither does affect those taxes that use the rateable value as a taxable income (such as Income Tax for Non-residents).
What function does the reference value have and which taxes does it affect?
Besides its descriptive function, the reference value of a building serves as the taxable income for Property Transfer taxes and Documented Legal Acts (the ITP – Property transfer tax and documented legal acts), as well as taxes on Inheritances and Donations
Whenever a property conveyance is subject to any of these taxes, the reference value of the building in question shall serve as the taxable income of the corresponding tax. The reference value cannot exceed market value. To ensure this, reduction factors are used to determine this value thereby ensuring that its use as taxable income does not implicate a rise in the tax return.
Nonetheless, should the declared value, i.e., the paid price or the compensation is higher than the reference value of the building, the greater of the two will be used as the taxable income. Consequently, if the price is lower than the reference value, said reference value will be used to calculate the taxable income.
In this manner, the reference value of the property will be the minimum base used to calculate these taxes.
On the other hand, should the Property Tax and Documented Legal Act be applicable in the case of a draft copy of a notarized deed of a property, the taxable income cannot be lower than its reference value when the former is determined having in consideration the value of said property.
Finally, when the reference value is used as the taxable income for a tax return on the purchase of the building, said taxable income shall be taken into account to apply the rule to determine the taxable income of the Property Tax it is subject to. Therefore, the reference value can only affect the Property Tax when it comes to buildings that were purchased after 1 January 2022; in no case can it affect properties purchased before that date.
¿How can I know the reference value of a house?
his information is available to the public at: de la SEDE DEL CATASTRO.
In the case of doubts, consult a professional: a lawyer, financial advisor, or a notary public.
