Knowing the value of a property is fundamental when you are willing to buy a property. The most relevant when buying a property are the cadastral value, the market value and the reference value, which are important for the calculation of some of the taxes that you may have to pay for owning a property in Spain.
The cadastre is a database that compiles all the data relating to properties built in Spain; among them, the cadastral value, an administrative value objectively fixed for each property and which is obtained by applying the valuation criteria set out in the corresponding municipality’s valuation report.
Having a cadastral value in accordance with the property has an influence on the payment of taxes. This value is what determines the tax base for IBI and IRNR (Non-Resident Income Tax). Therefore, if this value is correct, the taxes levied on the property will be fair and you will not overpay annually.
The cadastral value is obtained from the Cadastre’s Electronic Office and uses objective information on the real value of the property.
The market value of a property fluctuates and depends on several factors, especially demand. If there are many buyers interested in purchasing a property with specific characteristics, the market value of the house will rise. If there are not, it will go down.
The market value is obtained through an appraisal or in the act of sale itself and takes into account temporary factors, such as demand or the economic context. This value is the one that determines the tax base for Wealth Tax and ITP (Property Transfer Tax), unless the reference value is higher than the market value.
The cadastral reference value is the value determined for a property on the basis of the data in the Cadastre, which corresponds to the most likely price for which a property could be sold between independent and unencumbered parties.
On 1 January 2022 a series of changes came into force in relation to the cadastral reference value, as established in Law 11/2021, of 9 July. These are the main novelties to be taken into account:
There is now a new method for calculating the cadastral reference value. The General Directorate of Cadastre provides this data based on the purchase and sale prices provided by Notaries and Registrars, leaving aside the state of the property, a factor that previously influenced the calculation of the cadastral reference value.
It is worth highlighting the disadvantage of this new method: dwellings in the same building and on the same floor are valued in the same way without taking into account the circumstances of each property, such as, for example, renovations.
The other important change is that, from January 2022, the cadastral reference value will be imposed as the taxable base for calculating the taxes that affect anyone who inherits, buys a second-hand property or receives a donation of a property. Consequently, the new cadastral reference value may lead to an increase in the following taxes:
This possible tax increase only affects properties acquired from January 2022 onwards, without retroactive effect.
The new cadastral reference value is the minimum taxable value, even when a property transaction is signed before a notary for a lower value. In other words, the taxpayer is obliged to pay tax on the highest value between the reference value (cadastral value) and the deeded value. This is the main difference to be taken into account for the calculation of the indicated taxation of a property in 2022.
Therefore, the cadastral value is indispensable for the calculation of local taxes such as IBI. Knowing the reference value of the property is crucial to correctly pay taxes such as the ITP or Wealth Tax and the market value is essential to make the right investment decision.
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