What happens if I sell or buy below the reference value?
The entry into force on January 1 of the new Cadastre reference value introduced an important change in the real estate market. This value is the minimum basis for calculating taxes as important as Inheritance and Gift Tax, Transfer Tax and Stamp Duty.
The calculation of the new cadastral reference value is made by the General Directorate of Cadastre based on a series of market data and applying a percentage reduction. This value, which can be accessed through the agency’s Electronic Headquarters, is approved on an annual basis.
Where do discrepancies arise? In one fundamental aspect: it does not take into account the particular characteristics of the properties. This is where there may be significant differences between the market value (and the minimum basis for taxation) and the real value (for which the sale and purchase transaction is concluded).
A simple example to understand it better: the reference value will be the same for two similar homes in the same building, even though one is renovated and the other is not. Thus, if the unreformed property is sold for a price lower than the new Cadastre reference value, it will be subject to the same tax burden as the reformed property that would be sold for a higher price.
What happens if there are discrepancies with the Catastro reference value?
When differences arise, taxpayers will always be taxed on the higher value, whether it is the deed value or the Cadastre value, which is considered a minimum base. This is a clear disadvantage for many taxpayers, who may be obliged to calculate taxes on a basis higher than the real price of the property.
Thus, in the event of a discrepancy in the cadastral value, there are two possibilities:
1. To pay tax at the official reference value and subsequently initiate a claim procedure, requesting the rectification of the self-assessment and the refund of the undue income.
2. To be taxed on the value of the deed, subsequently appealing the liquidation notified by the Administration. This second way entails the risk of penalties, since taxation below the reference value of the Cadastre implies fraud. Not only that, but the taxpayer would have to pay the corresponding late payment interest. Therefore, it is worth analyzing whether it is worth taking the risk or not.
In either case, an essential aspect is that the person who considers that there is a discrepancy is the one who must demonstrate that the Cadastre reference value does not conform to the market value.
How to resolve discrepancies?
In order to rectify this reference value that is considered not to be in line with reality, it is necessary to provide some type of objective evidence that may be considered admissible in an administrative procedure. The most effective way is to carry out an independent appraisal that proves that the value of the property corresponds to the one that appears in the deed and not to the “official” one.
In that sense, the ideal is to request an appraisal before closing the sale and purchase transaction and to check the reference value of the Cadastre.
