What changes with the new tax value and how it affects personal income tax and the municipal capital gains tax

The new Cadastre reference value, which came into force at the beginning of the year, is the taxable base for taxes as important as the ITP, which is paid when buying a used house, or the Inheritance and Gift Tax (ISyD). It also affects Wealth Tax, Personal Income Tax and Capital Gains Tax.

How does the new value affect personal income tax?

This new tax value affects the IRPF, but it is important to differentiate whether the property is donated or bought/sold, since the IRPF law states that the value resulting from the application of the rules of the Inheritance and Gift Tax is taken as a reference, without exceeding the market value.

This means that the transfer value of the property corresponds to the value of the property for ISyD purposes. And this will be no other than the reference value of the Cadastre, when the property has been assigned such value, or the deed value, if it is higher.

And in case the taxpayer wants to sell the property received in donation, he/she will have to take as “acquisition value” the Cadastre reference value.

In the case of the purchase of a used home

The ITP is paid, whose taxable base is the new reference value of the Cadastre, but it does not affect the IRPF. Because the IRPF law establishes that the acquisition value, and transmission, in these cases, is the real amount for which the acquisition (or alienation) would have been made, that is to say, the real value of the house.

In the case of the sale of a house, the seller will be taxed on the actual value of the sale. The same applies to taxpayers who acquire a property for valuable consideration. For a future sale, they will have to take as “acquisition value”, the real amount for which they bought the property.

The ITP Law contemplates that the value check made by the Treasury to the buyer of a house will be notified to the seller, in order to impose the value checked in his Personal Income Tax, so he will have to pay Personal Income Tax according to the value checked by the Treasury.

Therefore, when a taxpayer who has acquired a property and paid the ITP according to the deed, receives a value check, the result of this check can also be notified to the seller, in order to alter the declared capital gain, and make him pay more IRPF.

However, the value verifications, after the approval of the reference value of the Cadastre, are going to be a minority. This is due to the fact that they will only be carried out when a property has not been assigned a reference value, and the Administration considers that the taxpayer has been taxed below market value.

Therefore, although it is foreseen that the result of a value check may be transferred to the seller, and to his Personal Income Tax, this will be rare in practice, as the number of value checks to be carried out will be reduced.

How does the Catastro reference value affect the municipal capital gains tax?

This new fiscal value of the property may affect the municipal capital gains tax, following the modification made by the Government in this tax last November via Royal Decree Law 26/2021 to adapt this regulation to the declaration of unconstitutionality of the Constitutional Court.

How does it affect? The new regulation establishes that taxpayers can avoid paying the tax if there has been no profit with the operation. And it also allows the taxable base to be calculated by two methods: according to the increase in value actually obtained or by an objective method that until now was imposed on taxpayers.

For either method, the taxpayer must compare the acquisition and transfer values. In the case of a sale, the value will be that of the deeds of sale.

In the case of a free transfer (inheritance or donation) the rule refers to the value declared in the ISyD which, by legal prescription, should be the reference value of the Cadastre. This, unless the deed has been deeded for a higher value, or the property has not been assigned a reference value.

How to appeal the Cadastral reference value in Personal Income Tax and capital gains taxes

The possibility of appealing the reference value is only expressly provided for in the ITP and ISyD regulations. A similar problem arises in the area of Wealth Tax. The regulations of this tax also do not provide for the possibility of challenging such a value. However, these taxpayers will be able to appeal the reference value when they acquire the property (claiming the ITP or ISyD paid), and thus avoid that this value affects their Wealth Tax.

But in the case of Personal Income Tax or municipal capital gains tax, taxpayers will not have the same luck, since in principle they do not have legal means to appeal this reference value, which could lead to the paradox that this value is imposed on them to calculate the amount to be paid in Personal Income Tax or capital gains tax, but they are not allowed to appeal this value.