The New Property Value for Tax Purposes: "Valor de Referencia"

Since the 1st of January 2022
fiscal value

New Value of Reference for Tax Purposes: “Valor de Referencia”

Since the 1st of January 2022, there is a new and important detail to be aware of about the property that you are wishing to buy (or sell) in Spain: the “Valor de Referencia” or “Value of Reference“.

This new value is now the one used by the Tax authorities to calculate the Transfer Tax, the Inheritance Tax and the Donation Tax, and in the future, it might affect other taxes.

Let’s see how it works with an example: You are buying a property in Spain for a price of 300.000 Euros, but the “Value of Reference” is 500.000 Euros. You will have to pay the transfer tax (curently 7% in Andalucia)  on 500.000 Euros. However, if the “valor de referencia” is lower than the amount you are actually paying, you would still have to pay the tax on the higher amount. Yes, the Tax Office never loses…

Why can this new value be so different to the actual price in some cases? According to the information provided by the Tax auhtorites, this value has been calculated using the information provided by the Notaries of real estate transactions in the same area with same tipology . So if you buy the cheapest property in a very expensive area, it is very likely that the “valor de referencia” results in being a higher amount than the actual price.

Fortunately, since the new system came into force, we have seen that most of the properties have been assigned a “valor de referencia” lower than the actual sale price, so we don´t expect most properties to be affected by this new regulation. However, we have already detected some cases where the “valor de referencia” is much higher than the actual sale price, most of them in upmarket locations, where the offical price per square metre built is very high, despite the condition of the property and other characteristics such as views, quality of materials, etc.

An important difference to consider, is that in comparison with the old system, if you declare a value below the “value of reference”, you will not only be requested to pay the right tax, but you will also receive a fine. So, should we face a situation where the “valor de referencia” is higher than the actual price, there are two different courses of action:

  1. To pay the tax on the value that we are actually paying for the property, wait to receive the letter from the Tax Authorities and  challenge the valuation, knowing that if you don’t succeed, you will not only have to pay the tax that they were asking for, but also a fine and interests.
  2. To pay the tax on the “valor de referencia” and immediately challenge the valuation asking for a refund of the excess paid. In general, we would advise to take this route.

The decision of how to approach this situation will depend on each case, and it would always help to obtain a valuation from a qualified professional, as depending on this information, you can decide whether it is wiser to accept that you are buying below the market value, and in that case, pay based on the “valor de referencia”…, or if it is more beneficial to do the opposite. In some cases, it may even be better to choose another property, avoiding the whole problem at the outset, but by being aware of this, it will help you to make an informed decision when the time comes.

Here, at Bravo Legal, we are specialists in property conveyance, and we can take care of every aspect of your purchase or sale. If you would like to receive a no-obligation quotation for our services in relation to the sale or purchase of a property in Spain, please fill out the following form, providing us with some information about the purchase or sale you are planning (price, conditions, location of the property, resident/non-resident etc.) and we will get back to you immediately. If you include the Referencia Catastral, we will provide you with the “Valor de Referencia” for your property without any cost.

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