What is the tax reference value and what impact will it have on your purchase, sale or inheritance in Spain? Since its introduction in 2022, the Valor de Referencia del Mercado become the absolute standard for Spanish tax authorities. In this article, we analyse the financial implications and your legal options.
What is the tax reference value in Spain?
The tax reference value (Valor de Referencia del Mercado) is the minimum value the Spanish government assigns to a property for calculating transaction and wealth taxes. The Spanish land registry (Catastro) automatically calculates this value based on notarised sale prices in the same zone. For the tax authorities, a simple principle applies: the taxable base is the highest value of either the actual purchase price or this reference value.
Note: Do not confuse this with the cadastral value (valor catastral). The cadastral value is historically much lower and serves for municipal taxes (IBI). The new reference value leans much closer to the actual market value.
How accurate is this valuation in practice?
Although the system is meant to be market-based, it works with an algorithm that is “blind” to the specific condition of a property.
Expert Quote: “The Land Registry's algorithm sees no difference between a luxury renovated villa and a dilapidated one in the same street. This creates serious tax discrepancies in practice,” states a senior real estate analyst at the Spanish professional association of tax advisers.
Impact on Buyers: Impact on Transfer Taxes (ITP)
If the reference value is higher than the price you agree with the seller, you will pay the transfer tax (Impuesto de Transmisiones Patrimoniales or ITP) on the reference value. So you are taxed on a notional value, not on what you actually pay.
Calculation example purchase villa in Altea:
- Agreed purchase price: € 500.000
- Established reference value: € 580.000
- Registration fees (Valencia region, 10%): You pay 10% at €580,000.
- Financial impact: You pay € 58.000 taxes instead of €50,000. A direct additional cost of €8,000.
Warning against price manipulation: Some buyers try to artificially depress the price (“pay under the table”). This is pointless and dangerous. The chance of being caught by the Agencia Tributaria is virtually 100%, resulting in heavy penalties. Moreover, you are cutting your own fingers: a lower official purchase price means a higher profit (capital gain) on subsequent sale, on which you pay 19% tax.
Read more about property purchase costs in Spain.
Consequences for Sellers: The Value Added Tax
As a seller, you are also bound by the reference value. Spanish capital gains tax for non-residents (19%) is calculated on the difference between the purchase value and the sale value. If the tax authorities judge that the sale value (the reference value) is higher than what you put in the deed, you will be taxed on that higher amount.
- Scenario: In the above example in Altea, the seller is taxed on a €580,000 sale even though he received only €500,000.
- Risk: In a worst case scenario, the seller pays 19% on that notional capital gain of €80,000, amounting to €15,200 additional tax.
Learn more about capital gains tax in Spain here.
Consequences for Heirs and Gifts
The biggest tax impact is seen in inheritances and gifts. Here, there is often no “market transaction” to substantiate the value, so the reference value automatically becomes the norm.
Impact on Inheritance tax (Double tax burden)
For Belgian residents, Flemish inheritance tax is due on worldwide assets.
- In Spain: Thanks to high exemptions (e.g. €1,000,000 per heir in Andalusia), Spanish inheritance tax is often €0.
- In Flanders: The Flemish tax authorities take over the value of the Spanish property in the estate. Due to the higher Spanish reference value, the taxable base in Flanders increases significantly.
Example flat in Estepona:
- Rating for 2022: € 210.000
- Current reference value: € 305.000
- Consequence in Flanders: The heirs pay 27% inheritance tax on the bracket above €250,000. The value difference of €95,000 immediately creates a much higher tax bill in Belgium.
Read more about estate declaration in Spain.
Impact on Donations (The “Peseta trap”)
Gifting in Spain is more expensive than inheriting. In addition to gift tax, the donor also pays capital gains tax (the so-called Ganancia Patrimonial).
Example: Parents bought a property on the Costa Brava in the 1980s for 9 million pesetas (€55,000). The current reference value is €480,000.
- The capital gain amounts to €425,000.
- The taxman charges 19% tax on this amount.
- Cost: €80,750 in capital gains tax, not to mention the gift tax itself.
Find out more about inheritance and gifting in Spain.
Solutions: What if the reference value is too high?
Is the reference value manifestly higher than the actual market value (e.g. due to poor condition of the property)? You legally have three options. We recommend option 3 for most clients.
- Resignation: You accept the value and pay the higher tax.
- Contesting afterwards: You pay on the actual price. The taxman will almost certainly send an after-tax bill with penalty and interest, after which you will object. This is risky.
- Proactive contestation (Recommended): You calculate the taxes on the reference value, but should simultaneously submit a formal request for rectification, supported by a valuation report and evidence (photos, renovation costs).
Frequently asked questions (FAQ)
1. Where can I find the tax reference value of my property? You can access the reference value via the Spanish Land Registry website (Sede Electrónica del Catastro). To do so, you will need your digital identification (such as a digital certificate) and cadastral number (referencia catastral) of the property needed.
2. Is the reference value the same as the market value? No. The reference value is an administrative calculation based on averages in a neighbourhood. The market value is the price a buyer is actually willing to pay. However, since 2022, the reference value is often very close.
3. Does the reference value also apply to homes I bought before 2022? The reference value has no retroactive effect on the purchase taxes you paid in the past. However, it does apply if you were to sell, gift or bequeath that property now. It is therefore relevant for any current owner.
4. What if my house is a ruin but the reference value is high? The system does not take into account the condition of the property. In this case, you need an official valuation report (tasación) to show that the real value is lower due to the necessary renovations. This will allow you to legally challenge the reference value.
About the author: Glenn Janssens is a lawyer specialising in Spanish real estate transactions and tax regulations. Since 2017, he has been helping Belgian and Dutch individuals and entrepreneurs to safely purchase and structure real estate in Spain. He guides files from A to Z: from due diligence, ownership and tax control to estate planning and optimisation for residents and non-residents. Thanks to his years of experience, hundreds of handled files and focus on transparent communication, Glenn makes complex Spanish legislation understandable and practically applicable for every property buyer.
