How does the new Cadastre reference value work?

The new Cadastre reference value is now operational. We take a practical look at what the modification consists of in order to understand how it affects taxpayers and what its impact is.

Since 1 January 2022, this value has been the taxable base for such important taxes as Transfer Tax (ITP) and 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.

Below, we share with you a summary of the analysis carried out by the law firm Ático Jurídico for idealista.com:

What exactly has changed?
Law 11/2021 on measures to prevent and combat fraud, passed 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.

What is the value to declare?
Despite the fact that the regulations against tax fraud 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 will have to initiate a value check.

What happens if the property does not have a reference value?
In case the property does not have a reference value, taxpayers are only obliged to pay tax 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.

What happens if the tax is paid below the reference value of the Cadastre?
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 a procedure 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.

How do I appeal against the Cadastre's reference value?
The law contemplates two ways of challenging the Cadastre reference value. The first is to pay tax in accordance with the Cadastre reference value and then request the rectification of the self-assessment and the refund of undue income. The second would consist of paying tax at the deed value (lower than the Cadastre reference value) and then appealing the liquidation notified to you by the Administration. However, such a liquidation would be accompanied by interest for late payment and the taxpayer risks being penalised.

How do I prove that the Cadastre reference value does not correspond to the market value of a property?
In order to prove that the new reference value does not correspond to the market value of a property, the taxpayer can use any legally admissible means of proof.

How can I appeal against an assessment of the value of a property that does not have a reference value?
When a property does not have a reference value, the taxpayer is obliged to pay tax at the market value. If the tax authorities do not agree, they will have to initiate a value assessment and this can be challenged in the same way as before.

What happens if the taxpayer decides not to complain?
If the taxpayer is satisfied with the result and decides not to complain, the reference value of the Cadastre will become final and he/she will have to pay the Transfer Tax or Inheritance and Gift Tax, as the case may be.

You can read the original article at this link.