The recent Law 11/2021, of 30 June, on measures to prevent and combat tax fraud, makes numerous modifications throughout the national legal overview, with the aim of adapting Spanish legislation in this area to the regulations within the European Union.
One on the most relevant áreas subject to modification has been real estate investment and the tax implications that may derive from it. In particular, and as the most important point, we would like to highlight the introduction of a new concept: the market reference value.
This value directly affects, since 11th of July, the determination of the taxable base of taxes such as Inheritance and Gift Tax (IGT) (“Impuesto sobre Sucesiones y Donaciones” or “ISD”), Property Transfer and Stamp Duty Tax (PTSDT) (“Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados” or “ITPAJD”), or Wealth Tax (WT) (“Impuesto sobre el Patrimonio o IP”). However, the same does not apply to Real Estate Tax (RET) (“Impuesto sobre Bienes Inmuebles” or “IBI”), where the reference will continue to be the cadastral value of the property.
For IGT and PTSDT, the taxable base is set at the market reference value, unless the value declared by the interested parties is higher. If there is no such reference value, the taxable base is the higher of the market value and the value declared by the interested parties.
In addition, the Law recognises the possibility for the taxpayer to challenge this market reference value when appealing the administrative settlement or when requesting the rectification of the self-assessment, and excludes the possibility for the Administration to check the property value when the market reference value or a higher one is used.
In relation to the WT, it is established that real estate (both rustic and urban) will be computed at the highest of the following three values: the cadastral value, the value determined or verifieed by the Administration for the purposes of other taxes (the market reference value) or the price, consideration or acquisition value.
But what is the market reference value?
According to the Law 11/2021, the General Direction of the Cadastre will determine objectively, from the data collected in the Cadastre, this reference value, which will be the result of an analysis based on the prices communicated by the public notaries in the real estate sales and purchases made.
To this purpose, the General Direction of the Cadastre will include the conclusions of the analysis of these prices in an anual reporto n the real estate market, as well as in a map of values delimiting the territorial áreas of valuation, to which it will assign average value modules for real estate products.
The limit of the reference value is the market value, and in order not to exceed it, market depreciation factors are set for properties of the same class.
The elements for determining the reference value of each property and the corresponding reduction factors shall be approved, by resolution, by the General Direction of the Cadastre before 30th October of the previous year to that in which ther are to take effect.
Before their approval, a collective audience will be held, during which the interested parties may present the allegations and evidences thet deem appropriate. Likewise, the General Direction of the Cadastre’s resolution may be appealed via economic-administrative channels or by means of an appeal for reconsideration.
However, until the regulatory development is approved, the Law distinguishes between urban and rural real estate, to which it establishes the application of the value modules in accordance with the following guidelines:
On the one hand, the standars for the value of urban real estate will be based on the technical rules for valuation and buildings. In addition, the land values of each zone will allow the reproduction of the average value modules in each homogeneous territorial area of valuation.
The resolution to be approved by the General Direction of the Cadastre will define its application and will specify its calculations methods, basic land and construction modules, land values for each zone and their construction costs, as well as, where appropriate, fields of application of corrective coefficients.
On the other hand, in relation to rural properties without buildings, the resolution to be approved by the General Direction of Cadastre will define their scope of application, specifying calculation methods, as well as, where applicable, amounts and fields of location, agronomic and socio-economic corrective coefficients.
Although it is true that this is a new reference value, it is surprising that a valuation is established which, in essence, ignores certain particular circumstances that can increase or decrease the value of a property, such as sunlight, the location of a bar under the property, the building architecture with columns or master walls where work cannot be carried out, the state of the property itself, the amount of community expenses and a long etcetera of factors that can decrease or increase by 10% or 20% depending on the specific circumstances of the property.
Translated with www.DeepL.com/Translator (free version)
These are the most important issues that, with regard to the taxation of real estate investment, can be found in the modifications made by the Law 11/2021, of 30th June, on measures to prevent and combat tax fraud.
If you would like to know more about related matters, ori f you intend to invest in real estate with confidence, please do not hesitate to contact our Real Estate department by emailingo email@example.com or by calling 934 160 004.