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How can we calculate the transmission tax on a Spanish property?

escala con dinero e impuestos 1325 371 - How can we calculate the transmission tax on a Spanish property?

Cadastral Value or market value of the property?

The Spanish Tax Administration applies taxes on the property transmissions in accordance with a valuation method utilising the cadastral value of the property multiplied by coefficients.
It turns out that, according to art. 10 of the corresponding Law of Patrimonial Transmissions, the taxable base of the Tax is constituted by the market value of the property of the transferred good, but, according to art. 57.1 of the General Tax Law, the real value of the property transferred is determined by applying a multiplier coefficient to the assessed value of the property.

This enters into evident contradiction when the real value does not coincide with the official calculated value. The cause is easy to guess: the Administration is slow in determining the coefficients. In fact, in Spain, we have benefited for many years from significantly low calculation coefficients, which allowed us to declare values well below the real ones. The Administration reacted in the years of the real estate bubble, which caused that, in the following years of crisis, the values were excessive.
What should we do, then, when the real estate that we acquire has a lower price than the one obtained according to the valuation method by multiplying coefficients on the assessed value assigned to it? What is the value we must declare? The amount actually paid or the value that the Administration would give you in case of a check?

The Supreme Court of Spain analysis

A recent judgment of the Supreme Court of July 2, 2018, has established, finally, that the value that we must declare is the actual value actually paid, even if it is lower than the value determined by the Administration; and this because, according to the Sentence,
“The real value of a property is the one which would be agreed upon by two independent law subjects in a free market context and this is obviously conditioned by circumstances of varying magnitude and significance and, among others, the severe and prolonged economic crisis suffered since the second half of the previous decade, which means that the real value, far from being immutable, can vary depending on the temporal, spatial or other nature to which it refers. ”
This legislation is inspired by reality.
And the Court insists on indicating that the method of applying abstract coefficients on the Cadastral Value is a legal method but not an ideal method, by its abstraction, to establish the real value.

Who should prove the Value?

Finally, there is the issue of who has to prove the value: On this, the Supreme Court establishes that the Administration can not reverse the burden of proof, that is, that it can not force the taxpayer to prove that the proven value obtained by it does not corresponds to the real value, but it is the Administration that must justify why it does not accept the declared value and prove that the declared price is not the one actually paid, or that it does not correspond to the real value.
Given that the burden of proof falls on the Administration, the taxpayer is not legally obliged to justify that the declared value of the property coincides with the real value, but, if it is dissatisfied with the taxation of the administration, it can avail itself of any admissible evidence that would help to contribute for determining an official valuation.
It is very possible that current buyers find that the price for which they acquire a property is less than the amount obtained by applying the multiplier to the cadastral value applied by the Administration. In this case, we would advise opposing the Administration tax.


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