Spain Explained

Changes to property transfer tax – New reference value in Spain

When property is transferred from one person to another in Spain there is a tax to pay. From January 2022, inheritance, donation and transfer tax, will all be affected by the new ‘reference value’ in Spain, in Spanish it is called Valor de Referencia.

If you have property in Spain or are considering buying somewhere, then you should be aware of the new ‘reference value’ in Spain that has been introduced. This value will determine how much tax you must pay when your property is transferred to another owner.

The new ‘valor de referencia del inmueble’ was introduced at the beginning of January 2022 in order to calculate property transfer taxes such as the ITP (Impuesto sobre Transmisiones Patrimoniales)  and ISD (Impuesto sobre Sucesiones y Donaciones) – inheritance and donation tax.

From 1st January 2022 whenever a transfer of property is made through either sale, purchase, donation or inheritance it is the reference value that will be used to calculate how much must be paid to the taxman. Exactly how much this is, will be updated periodically based on property sale values recorded by notaries and registrars in the previous six months.

This use of a calculated value rather than the actual amount you’ve paid could cause some interesting scenarios when there are significant fluctuations in market prices. For example, following the six-month period prior to a slump or financial crisis you could find yourself being charged at the previously elevated prices, even though prices are subsequently reduced, and it has become a buyer’s market.    

The bad news is that if the sale price is higher than the reference value then the tax will be based on the sale price. However, if the sale price is less than the reference value it is the latter that will count. In other words, there is no win, win on this. You will always be charged at the higher value.

The change does not affect all property taxes. The cost of your IBI or council tax will not alter as this will still be based upon the cadastral value. The cadastral value, used to calculate the IBI tax, is updated by the laws governing state taxes. However, the reference value in Spain will be determined, as mentioned above, according to purchase and sales prices during the previous six-month period. The reference value in Spain will be publicly known whereas the cadastral value will continue to be protected data.

Calculating the reference value in Spain

Updated every year, the reference value will reflect the market value of the property, calculated from the real estate sales prices according to information provided by notaries and registrars. There will be no visit to the property and it will not take into account whether the property is to be renovated and the buyer has bought it cheaper than the market price because of this. Those buying property to refurbish will need to keep this in mind when making their purchase.

The cadastral value, on the other hand, takes into account the location, age, quality of construction, and renovations that have been carried out. It will be possible to challenge the reference value in Spain but it will be down to the person paying the tax to prove and demonstrate the discrepancy.   

The government has stated that the new reference value does not represent an increase in tax. Technically, this is correct. However, even though the percentage of tax to be paid isn’t increasing, it could still mean people paying more because of the new value attributed to the property.

So, for example, if you are intending to buy a second-hand property for €200,000 but the reference value is €240,000 it will be the reference value that will be used to calculate how much tax you must pay. So, there will be an additional €40,000 to pay tax on. It is likely that most situations will reflect this scenario, with the reference value being higher than the actual cost of the purchase. After all, everyone likes a bargain and will look for a deal that is good value.  

Higher taxes on property will also have an impact on rental costs.  Those people who buy to rent out property are likely to try and pass down the increase in overall cost of their purchase to the tenant.

Although it is early days in the use of this new value, it is important that owners and prospective owners of property in Spain build this into their budget calculations.

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15 comments

Teresa

26 January, 2022 9:19 pm

For people of old age 70 does this tax apply still for a habitual home?

Oscar Paoli

28 January, 2022 11:51 am

Hi Teresa,

Yes, this applies for everyone who is interested in purchasing.

With kind regards,

Ábaco Advisers

Susan

31 January, 2022 5:27 pm

I was told if you are over 65 and a resident, you are not liable for tax.

Oscar Paoli

1 February, 2022 10:01 am

Hi Susan,

You might be thinking of the Capital Gains Tax exemption if you are over 65 and sell your main residence where you have been living permanently for at least the last 3 years.

With kind regards,

Ábaco Advisers

Ana

31 January, 2022 8:20 pm

Thanks for the article, very useful. Where can one see the “reference value” published? (I wonder whether there is a specific website for that?). Also, which value should appear on the “declaración de la renta”: the “new reference value” or the “cadastral value”, for doing the Spanish tax return (as a Spanish resident)? Many thanks. Kind regards.,

Oscar Paoli

1 February, 2022 10:03 am

Hi Ana,

You may look it up in the Catastro home page in the following link:

https://www1.sedecatastro.gob.es/Accesos/SECAccvr.aspx

För la declaración de la renta de value is still the cadastral value.

With kind regards,

Ábaco Advisers

Gill Stevens

1 February, 2022 2:19 pm

What is the percentage of tax payable and what exemption is there for spouses left a house in a will where they are not on the deeds. OAP’s lived in it for 15 years

Oscar Paoli

2 February, 2022 3:06 pm

Hi Gill,

The inheritance tax depends on various factors such as the total value of the property, family relationship, where the property is located, pre-existing assets, etc. It is not possible to speak of a percentage tax rate as it is not fixed, but depends on a range (depending on the factors mentioned above). Likewise, the tax reductions for marriages depend on the specific region. If you would like detailed information for your case, please email us at legaldpt@abacoadvisers.com and we will be happy to assist you with a free calculation.

With kind regards,

Ábaco Advisers

Colette

1 February, 2022 3:14 pm

Alas if one is resident and 65years of age are the rulings the same whereby we do not have to pay for he tax ?

Oscar Paoli

2 February, 2022 3:05 pm

Sorry, do not completely understand your query. Could you please clarify?

With kind regards,

Ábaco Advisers

Bob Harrison

1 February, 2022 11:41 pm

So, it is likely that most situations will reflect that the sale price will be lower than the reference value (market value) as everyone likes a bargain. Surely the sale price dictates the market value!
This is no different to 2008 crash when property prices crashed but the Valor Catastral Minimo remained constant. In 2015 we received a 4.000€ tax bill and 1700€ penalty for our property purchase. We appealed as the debt was over 4 years old and we had not been aware. Sadly, the conveyor had signed as received the bill and filed it away, and the “debt” was lifted from our bank account. Many municipalities continued to charge capital gains on the “increased” value of the land, even after the Supreme Court ordered them to discontinue.

Alex

1 May, 2022 6:16 pm

Hi, could you help me find the reference value of a house I’m interested in purchasing? I have found it on the sedecastrato website but can’t find the actual value on there…

Oscar Paoli

1 May, 2022 9:28 pm

Hi Alex,
We would need to have more details of the property and its owner. If you have them we might be able to assist you.
Should you have the innformation you may contact us at info@abacoadvisers.com
With kind regards,
Ábaco Advisers

Shirley

31 August, 2022 4:55 pm

Does this also include when one spouse dies and their ‘half’ of the house is transferred to the surviving spouse.

Oscar Paoli

1 September, 2022 8:58 am

Hi,
This new reference value also affects an inheritance and donation process in Spain.
With kind regards,
Ábaco Advisers