Since 1st January the new reference value is applied to calculate the taxable amount for Capital Transfers and Legal Acts tax (Impuesto de Transmisiones Patrimoniales y Actos Jurídicos, ITP) and Inheritance and Donation tax (Impuesto sobre Sucesiones y Donaciones, ISD).
From the beginning of 2022, the reference value of a property will be its taxable amount when conveyance of said property is subject to any of the aforementioned taxes. Furthermore, the current Autonomous Community taxes will also be applied as these are transferred taxes.
Nevertheless, the taxable amount will be the largest number should the settled declared value, price, or compensation for the conveyance -either through a notarised deed or a private contract- be greater than the given cadastral value.
The Spanish Treasury explained this change would not apply retroactively. In other words, it will come into effect for sales or inheritances from 1st January 2022 onwards. The goal is to fight against law suits that defined the taxable amount as the true value. This happened because the taxpayer declared the purchase value to be under the amount the Spanish Treasury assigned to the property. Therefore, a verification process is initiated.
Gerard Aguilar, Tecnotramit’s Taxation Manager, points out ‘as a plus point, this law seems to offer greater legal certainty towards tax authorities as they will have an objective element at their disposal to determine the taxable amount.’
Simultaneously, Aguilar mentions ‘the burden of proof to appeal the cadastral value is on the buyer and doesn’t seem to favour the average taxpayer who usually tries to avoid any conflict with the Treasury’. He also adds that most likely ‘income will rise in the cases the cadastral value is higher than the purchase price or compensation.’
To summarise, from 2022 Land Registry will use individual data on property tenure, conservation, and purchase price to develop a new property reference value on which inheritance, conveyance, and income taxes will be based upon.