Understanding Reference Value in Spain: Essential information for buyers and sellers

Why reference values matter in real estate transactions – And why they’re often inaccurate

Reference values play a crucial role in real estate transactions in Spain, particularly for calculating Wealth Tax, Transfer Tax, and Inheritance/Gift Tax. Yet, many buyers and sellers find these values inconsistent. Here’s what you need to know about Reference Values, as outlined in Survey Spain’s latest clause for Survey/Inspection and Valuation/Appraisal reports.

New Taxation Clause for Real Estate Transactions (October 2024)

1. Tax Implications: The Reference Value system has been in place since January 1, 2022. Due to its relevance, we believe it should be standard in sales details. As the Reference Value is recalculated annually, we recommend consulting a tax expert to verify the latest calculations.
2. How Reference Value is Calculated: Based on the Catastral square meter measurement, the Reference Value per square meter is derived from notary-declared property sale prices. These are categorized by similar location, specifications, and other factors, with 90% of that calculation taken as the Reference Value.
3. When Reference Value Applies: Used exclusively for Wealth Tax, Transfer Tax, and Inheritance/Gift Tax, the Reference Value is not applicable to local property tax (IBI). Upon sale, the higher of three values—Catastral Value, registered Purchase Price, or Reference Value—serves as the base for these taxes.
4. Current Reference Value: For this property, the Reference Value stands at €xx,xxx,xxx. Buyers purchasing below this Reference Value may appeal, but the burden of proof falls on them, not the tax authorities. Fines can apply for incorrect or late tax payments, so paying first and appealing later is advisable.
5. Survey Spain’s Insights Since 2022: Survey Spain has tracked Reference Values against market valuations. Currently, the Reference Value averages at 72.6% of Market Valuation, Asking Price, or Buying Price. While low values are less likely to affect tax calculations, significant deviations—ranging from 28% to 208%—underscore why it’s essential to discuss these with your lawyer or accountant.

Understanding Reference Values is vital, as inaccuracies can have major financial implications. Contact Survey Spain for professional valuation advice.