What is the reference value of a property and how is it applied at the Costa Brava?

From January 1st, the central government introduced the so-called reference value. It concerns a tax that is levied when purchasing a property on the Costa Brava; it was introduced through a new Anti-Fraud Law.

This new value will affect the Tax on Documented Legal Acts (IAJD), the Inheritance and Donations Tax (ISyD) and the Property Transfer Tax (ITP).

At Porfinca we wanted to share with you all the information we have concerning the reference price. We will also explain how it is applied on the Costa Brava.

What is the reference price or reference value?

When acquiring a property, whether through a purchase, inheritance or donation, this tax will be determined by this reference value or the final purchase price. The highest of the two will serve as the basis for the property transfer tax

This fact means an important change in expenses when buying a home; no longer it will depend on the final purchase price only. Tax will be levied on the highest of the 2 values ( Sales price or Reference value).

Example of the reference value on the Costa Brava

A buyer is interested in a second home on the Costa Brava with a cost of €500,000; the reference value seem to be €550,000.

In this case the Property Transfer Tax will be calculated based on the reference value of €550,000, and not on the sales price.

In this example we see that the buyer would have to pay an additional tax over 50,000 euros at the title deed; for this reason, this tax will be of great importance during the year 2022.

How did the real estate sector react?

The autonomous community of Castilla-La Mancha  has been pioneer in adopting this value for several years to check its efficiency.

However, the Superior Court of Justice of this Community and the Regional Economic-Administrative Court invalidated the use of it. According to their arguments, it did not take into account the specific circumstances of each property.

For this reason, one may challenge the reference value in some cases.

If it can be proven that it harms the legitimate interests of the declarant, the latter may make use of a contradictory expert appraisal; a competent technician needs to carry out this appraisal.

How to calculate the Reference Value

The General Directorate for Cadastre determines this new Reference value.

This public body will determine the value based on data obtained from the sector’s annual reports; here all the country’s purchase prices are listed. Every year these values will be updated; the quality of the construction, reforms or renovations in the building, the state of conservation, the location of the property and its age will determine the average purchase prices

An average value that depends on the transactions of the previous year are established for each geographical area. The value is normally represented in €/m² for collective housing areas; for single-family areas it is only represented in €.

At Porfinca we keep track of all the changes in the current legislatures; we are experts in the real estate sector at the Costa Brava

Contact us without obligation and we will help you with all the tax procedures for the purchase or sale of your home on the Costa Brava.