Since 1 January 2022, a so-called cadastral reference value has been mandatory for urban properties in Spain, which is used to calculate land transfer and inheritance taxes. This new regulation can lead to considerable financial and legal challenges for property buyers and owners on the Costa Blanca. This is because this value, which is determined on the basis of statistical data without the property itself having been appraised, does not necessarily reflect the actual market value.
What is the cadastral reference value?
The cadastral reference value is determined on the basis of transaction data and reflects a flat-rate estimated value for properties. The problem is that this value serves as the basis for tax assessment - particularly for property transfer tax (ITP) and inheritance and gift tax (ISyD). Anyone who buys or inherits a property must calculate taxes on the basis of this value, even if the actual market value is lower.
Reversal of the burden of proof
A key aspect of the regulation is the reversal of the burden of proof: taxpayers who wish to contest the cadastral reference value must themselves prove that the established value is too high. This means that the buyer must bear the costs of an expert opinion to prove that the actual market value is lower than the assumed cadastral value.
Judicial decision: Hope for taxpayers
However, a recent judgement by the Supreme Court of the Comunidad Valenciana in July 2024 offers a possible solution for taxpayers who wish to contest the cadastral reference value.
The Court found that the application of this value was tantamount to a valuation that was carried out without a proper assessment of the property. This means that affected buyers have the option of contesting the value in court without having to pay the tax liability in advance.
What does this mean for buyers?
For potential property buyers on the Costa Blanca, this means that the established cadastral reference value does not always reflect the market value. Anyone who finds themselves in such a situation should consider having an independent appraisal carried out in order to have a basis for appealing against the assessed taxes.
Recommendations for buyers and owners
- Find out the cadastral reference value of the property before you buy.
- Have a professional
prepare appraisals to determine the market value
of the property.
- Check your legal options,
if the cadastral reference value is significantly higher than the actual value.
- Always seek legal advice in the event of uncertainties in order to minimise financial
minimise risks.
Property buyers on the Costa Blanca should be aware of the impact of the cadastral reference value and, if necessary, act in good time to avoid paying unnecessarily high taxes. Thanks to the recent judgement of the Supreme Court, there is hope that taxpayers can enforce a more realistic valuation of their property through legal appeal.