The Constitutional Court upholds the Treasury’s ‘tax hike’. Has Montero got her way and sorted it out in a weekend?

What many of us feared has come to pass. The Plenary Session of the Constitutional Court has decided to give its blessing to the controversial reference value of the Land Registry, that invention of the Treasury which, since 2022, dictates how much we must pay for painful taxes such as ITP (property transfer tax) or inheritance and gift tax.

Although the High Court of Justice of Andalusia tried to stop it on the grounds that it violated the principle of economic capacity — basically because the Land Registry values houses without ever setting foot in them — the Constitutional Court has looked the other way. According to the ruling, this method is ‘reasonable and objective’, even though (and here’s the catch) it does not match the actual price you pay for the house.

A victory for bureaucracy over common sense

The ruling, drafted by Judge Ricardo Enríquez Sancho, justifies this system under the umbrella of ‘administrative simplification’ and ‘legal certainty’. Translated into everyday language: it is more convenient for the Administration to charge you based on an algorithm than to send an expert to check if your house has damp, if the kitchen is falling apart or if the windows are forty years old.

The court admits that the system ignores the actual state of repair of each property, but considers it valid because it is an ‘open system’ that allows taxpayers to complain… but only after they have paid up.

The burden of proof trap: who pays the price?

This is where criticism becomes necessary. Experts complain that this ruling blatantly sides with the Administration. With this system, the Treasury has managed to circumvent the Supreme Court doctrine that previously required them to visit properties. Now, the ball is in your court:

You pay first: If you buy for €300,000 but the Land Registry says it is worth €500,000, you pay tax on €500,000.
You prove the error: If you want to claim, you have to hire an architect, pay for an expert report and get involved in a legal process that, in many cases, costs more than the tax savings you are seeking.

In practice, it is a system that discourages small taxpayers from defending their rights.

A disaster for the property market

This reference value is an insurmountable ‘minimum’. If you buy cheaply because the house needs a complete renovation, the tax authorities do not care: you will pay as if it were new. This leads to absurd situations where two flats in the same block have the same tax value even though one is a luxury property and the other is a ruin.

It is even a problem for sellers: if your house has an inflated reference value, the buyer will have to pay more tax, which will probably lead them to demand a reduction in the sale price. A tax penalty that distorts the real market.

What can taxpayers do?

Just because the Constitutional Court says it is “legal” does not mean that the value assigned to your house is “correct”. The legal route is still open, but the strategy has changed. It is no longer enough to say that it is unfair or unconstitutional; now you have to “speak the language of the Land Registry”.

To win this battle, the experts’ recommendation is clear:

Notarial deeds with photos: To record the actual state of deterioration.
Specialised technical reports: A commercial valuation is not enough; technical errors in the Land Registry database must be detected.
Preventive challenge: If you are going to sell, check the value beforehand to correct errors in surface area or age.

In short, we are faced with an administration that prefers statistics to reality, and a court, which we already know who controls, that has given it the green light. Market value has died in the offices of the Treasury; now what counts is what the algorithm says, unless you are willing to fight for every euro.