The new reference value is a concept determined by the General Directorate of Cadastre as a result of the analysis of the prices of all real estate sales that are made before a notary public, based on the cadastral characteristics of each property.

It is a value entered by the Law 11/2021, of July 9, on prevention measures against tax fraud transposing Directive (EU) 2016/1164. This law, which has already entered into force, does not have retroactive effects and does not affect operations carried out with a date prior to 2022.

In addition, we must differentiate it from the cadastral value that, although they are related values, are different concepts. 

The cadastral value is the appraisal of a specific property based on the application of the criteria included in the municipality's report on values. It will take into account issues such as the location of the property, the cost of construction, market values ​​of the land. 

What is the reference value and what changes does it incorporate in a property sale? 

From January 1, 2022, the new cadastral reference value will be the taxable base in the Inheritance and Donations Tax and the Tax on Property Transfers and Documented Legal Acts (ITP), unless the declared price or consideration value is higher. Therefore, the reference value will act as the minimum tax base for these taxes, unlike the cadastral value that serves as the tax base for the Real Estate Tax. 

The reference value constitutes the tax base of real estate. By this we mean that this value will be the basis for which the owner of a property will have to pay taxes. According to the law, as we have already mentioned, it cannot exceed the market value but, if the latter is higher than the reference value, it will be taken as the tax base, since the highest value will always be taken.

Until now, taxes were settled based on the market value of the property. Therefore, the Tax Agency could verify the operation and force to pay more if it was shown that the property had been sold below market value but, however, this involved many unnecessary litigations. 

 As of this year things change, since a reference value will be set that will determine what has to be taxed. This value has been created by the cadastre and it will take into account the deeds of sale made the previous year in each area in order to determine it. As of January 1, 2022, is when this value has begun to be applied, which may only affect the Wealth Tax in relation to real estate acquired as of the aforementioned date.

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