If you own or are considering buying property in Spain, it’s important to be informed of the new “reference value” that has been introduced.
This value will determine the amount of tax you’ll need to pay when transferring your property to another owner.
Starting from January 1st, 2022, the reference value will be used to calculate the tax amount for any transfer of property, whether it be through sale, purchase, donation, or inheritance.
This value will be updated regularly based on the property sales values recorded by notaries and registrars in the previous six months.
Unfortunately, if the sale price is higher than the reference value, the tax will be based on the sale price.
But if the sale price is lower, the tax will still be based on the reference value. In other words, the outcome will always be in favour of the higher value.
It’s important to note that not all property taxes are affected by this change.
The IBI or council tax will still be based on the cadastral value, which is updated by the state tax laws.
The reference value in Spain, on the other hand, is determined based on the property sales prices during the previous six-month period and is publicly known.
The reference value in Spain is updated annually and reflects the market value of the property, based on the real estate sales prices provided by notaries and registrars.
However, it doesn’t consider a property’s location, age, quality of construction, or renovations.
The cadastral value, on the other hand, does consider these factors. It is possible to challenge the reference value, but it will be up to the person paying the tax to prove any discrepancy.
The government has stated that the new reference value doesn’t represent an increase in tax, and technically, that’s correct.
However, even though the tax percentage remains unchanged, it could still result in higher payments due to the new value attributed to the property.
For example, if you’re planning to buy a second-hand property for €200,000 and the reference value is €240,000, the reference value will be used to calculate the tax amount.
This means an additional €40,000 will be subject to tax. In most cases, the reference value is expected to be higher than the actual purchase cost.
It’s still early days in the use of this new value, but it’s important to keep it in mind when budgeting for property ownership in Spain.