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Until the end of 2021, the purchase of existing property in Spain was subject to 10% registration (notarial transfer tax) or ITP. As of 1 January 2022, there will be a change in the calculation of transfer taxes. The cadastral reference values will now also be taken into account. We have summarised the new rules for you below:
ITP (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentales) stands for transfer tax in Spain.
Previously, tax was calculated on the declared value of the property in the deed of sale.
As of 1 January 2022, the cadastral value (reference value) of the property in question, as determined by the tax authorities, will also be taken into account.
From now on, the corresponding transfer tax will be withheld on the higher of the two amounts.
Example 1:
A property is purchased for €400,000 with the corresponding ITP tax of 10%. Upon verification, the reference value of the property is found to be €433,600.
Instead of €40,000 in transfer tax, the buyer must pay €43,360 in transfer tax, or €3,360 more.
If the reference value is lower than the purchase price, the higher amount is used.
Example 2:
A property is purchased for €650,000 with the corresponding ITP tax of 10%. Upon verification, the reference value of the property is found to be €623,600.
In this case, the transfer tax is €45,000 and not €42,360.
The reference value is determined at municipal level and depends on a number of factors, including the average price at which property was sold in a particular neighbourhood/district.
This value can be consulted at https://www1.sedecatastro.gob.es/, provided you have the necessary digital certificates or Cl@ve. Most solicitors and solicitor-notaries have such a certificate and can request the reference value of a particular property from the land registry on the basis of the cadastral number. This number is stated on the IBI assessment document (annual property tax), among other places.
CONCLUSION: It is therefore important to know the reference value before making an offer on a particular property and to know whether or not it will have an impact on the registration costs.
Authors: Patrick Lamoral (CEO IMMOFY) & Arnica Honing-Herwig (Poquet & Asociados)
