The keys to the new Cadastre reference value and its consequences for taxpayers
The new Cadastre reference value is now fully operational. Since 1 January, with the arrival of 2022, this value is the taxable base for taxes as important as the Transfer Tax (ITP) or the Inheritance and Gift Tax (ISyD). In other words, it is the key to determining how much tax has to be paid on the purchase, inheritance or donation of a used home.
In order to understand how it affects taxpayers and what its impact is, we take a practical look at what the modification consists of with the help of the law firm Ático Jurídico:
What exactly has changed?
Law 11/2021 on measures to prevent and combat fraud, approved in July 2021, included a modification of the taxable base for Transfer Tax (ITP) and Inheritance and Gift Tax (ISyD): it is no longer the ‘real value’ that has caused so many headaches for the Treasury in recent times and is now the ‘market value’, which will be determined by the reference value of the Cadastre.
For lawyer José María Salcedo, partner at Ático Jurídico, this change is accompanied by a radical change in the rules of the game that is detrimental to taxpayers. Until now, it was the tax authorities who were responsible for contesting if they thought that the deed value did not correspond to the real value of a property, whereas now it will be the taxpayers who will have to prove the opposite, so the burden of proof falls on them. What value should be declared?
Despite the fact that the tax fraud regulations came into force on 11 July, the new Cadastre reference value is effective from 1 January. In other words, taxpayers who have bought, donated or inherited a property between 11 July and 31 December 2021 must pay tax at the market value of the property or at the deed value, if this is higher. In the event that the tax authorities do not agree with this value, they must initiate a value check.
In the case of properties acquired since 1 January, taxpayers must declare according to the reference value of the Cadastre, as this is presumed to be the market value, regardless of the deed value. However, if the deed value is higher than the reference value, this will be the taxable base for the taxes that apply depending on the case (ITP for the purchase of used homes or ISyD for inheritances and donations).
What happens if the property has no reference value?
In case the property has no reference value, taxpayers are only taxed on the “market value”, which could well coincide with the deed value. In other words, the taxpayer must be taxed on the market value in the ITP and ISyD and can rely on the deed value for this purpose. And it will be up to the tax authorities to prove that the deed value does not correspond to the market value if it does not agree with what the taxpayer has declared.
In which cases will there be value checks?
Value checks will continue to be necessary to determine the value of those properties that have not been assigned a Cadastre reference value. In such cases, as mentioned above, taxpayers will be obliged to pay tax on the market value and, as this is an indeterminate legal concept, the Administration will have to initiate a value check if it does not agree with the declared value, according to the methods contemplated in article 57.1 of the General Tax Law. Therefore, there will continue to be checks similar to those that have been carried out in the past and which have been massively annulled by the courts in recent times, warns José María Salcedo.
What happens if tax is paid below the Catastro reference value?
If a taxpayer pays tax below the reference value assigned to the property, they will be in breach of the law and the Administration will probably initiate proceedings to regularise the taxpayer’s situation and force them to pay tax at the Cadastre reference value. Salcedo considers that it is also possible that the Treasury may also initiate a sanctioning procedure against the taxpayer, as he is taxed below what the regulations dictate. However, the liquidation can be appealed.