Column Lutz Minkner February 2022 - What's behind the new "reference value" for real estate
The Spanish real estate sector was once characterized by so-called „under-securitizations“, in which a lower purchase price was notarized than was actually paid. Even though under-securitizations are a thing of the past thanks to tightly meshed control systems, disputes with the tax authorities have arisen and continue to arise time and again when the tax authorities increase the purchase price as part of their right of review and enforce higher taxes in post-taxation proceedings. These disputes should be avoided in the future.
Due to the special provisions in the „Law against Tax Fraud of July 10, 2021“ (in implementation of EU Directive 2016/1164 of 12.07.16), a „market reference value“ has been set annually for every Spanish property since January 2022. However, the current cadastral value remains, which serves as the basis for calculating the annual municipal tax, for example. To calculate the reference value, the entire Spanish territory is divided into zones for which a flat-rate price per square meter is determined on the basis of records kept by Spanish notaries and land registries. This reference value is then the minimum amount on which land transfer tax, gift tax, inheritance tax and stamp duty are payable. Land transfer tax, for example, is then not payable on the notarized purchase price, but on the reference value. In future, the reference value must be stated in every deed of sale, in declarations on inheritance and gift tax, etc. In future, the reference value will also be used for property tax purposes. The reference value should be 90% of the market value.Disputes are nevertheless inevitable, as the flat-rate prices per square meter can only be average values and take just as little account of poor or even ruinous quality as the best materials and finishes. The legislator, on the other hand, claims that the introduction of the reference value will make things easier because it will eliminate the need for subsequent tax assessments and the corresponding proceedings before the Spanish tax courts. In reality, however, the law is aimed at increasing tax revenues. This is disguised by the fact that the tax base is being increased rather than the tax rates being raised.
The reference value is published annually for each property. If the reference value deviates significantly from the market value, legal action can be taken against the land registry authority. It is probably more cost-effective to challenge the reference value only in the event of a tax arising from a sale, gift or inheritance. In this case, the real estate transfer tax would first have to be paid on the reference value, for example, and then a corrected real estate transfer tax declaration with the lower value would have to be submitted and the excess amount claimed would have to be reclaimed. This claim for repayment should be accompanied by an expert's report documenting the lower value.
Lutz Minkner looks back on 45 years of activity as a lawyer, lecturer,
specialist book author and entrepreneur. author of specialist books and entrepreneur.
He has been a board member of the real estate company Minkner & Partner since 1984
