Over recent weeks, several provisions, resolutions and reports have been published on the reference value in property transfers, following the entry into force of Law 11/2021, of July 9, 2021, known as the Anti-Fraud Law (see our comment of July 10).
Under the Anti-Fraud Law, the reference value is used to determine the taxable amount for transfer and stamp tax purposes and inheritance and gift tax purposes, unless the value reported by the interested parties or the price paid (whichever is the case) is higher, then this reported value will be taken. In keeping with this rule, the law also made various amendments to the cadaster legislation to implement the calculation rules for the reference value.
According to these rules, the reference value will be the value determined every year (objectively and with market value serving as limit) by the Directorate General for the Cadaster, using modules based on an analysis of the prices in all real estate purchase transactions performed before an authorized certifying officer in each of the established uniform areas. In relation to how it is determined, the law specifies:
- The approval of a reduction factor for values of assets in a same class, to ensure that their “reference value” is not higher than their market value. This factor has been set at 0.9% for all real estate assets (rural or urban) by Order HFP/1104/2021, of October 7, 2021, published in the Official State Gazette on October 14, 2021.
- The publication every year by the Directorate General for the Cadaster of a report on the real estate market with conclusions from an analysis of the data on previous transactions and a map of values, identifying zones with uniform values and assigning average value modules for representative products.
- A set of transitional rules under which the Directorate General for the Cadaster must approve, based on the annual report on the real estate market, a decision defining the scopes of application for the land and construction basic modules, specifying the principles and rules for their calculation, the land values for each zone, construction costs and fields of application for the relevant correction multipliers. Now that the yearly report has been prepared, the Directorate General for the Cadaster has published two draft decisions on the elements needed to determine the respective reference values for urban and rural properties in 2022. The draft decision relating to the calculation method for the reference values of urban properties contains an important clarification. In provision two it states that the principles in the draft decision will only apply to properties built primarily for residential use and for storage-parking use for cadastral purposes. In other cases it will have to be taken into account that the transfer and stamp tax and inheritance and gift tax legislation (following the Anti-Fraud Law) stipulates that the taxable amount is the higher of reported and market value (ISD) or the higher of either of those values and the agreed price or consideration, on which an examination may be conducted by the authorities.
Lastly, the Cadaster Website has also published a set of questions and answers on a number of issues relating to the reference value. Among the answers provided, the Cadaster confirms that:
- the reference value may only be challenged where it has a tax effect and is the taxable amount for transfer and stamp tax or for inheritance and gift tax purposes, in similar terms to the provisions in the transfer and stamp tax and inheritance and gift tax legislation;
- if the reference value does not affect the cadastral value, it will not have any effect for real estate tax purposes;
- this value has to be taken into account under the rule on determining the taxable amount for wealth tax with respect to any properties that are acquired on or after January 1, 2022.