Home » Buyers are getting hit with inflated property-purchase taxes confirms new study

Buyers are getting hit with inflated property-purchase taxes confirms new study

spanish cadastral reference value for property tax
The Spanish Cadastre’s website allows you to check the new ‘Reference Value’

The new ‘Reference Value’ used since the start of the year to calculate property purchase taxes has inflated taxable values by 17% above market prices finds a new study by the Spanish Federation of Real Estate Associations (Federación de Asociaciones Inmobiliarias – FAI).

More evidence that the ‘Reference Value’ introduced by the government at the start of the year is just a cynical ploy to artificially inflate the taxes buyers have to pay when they purchase a resale property in Spain. In a study involving 400 real estate agents all over Spain the FAI found that the new ‘Reference Value’ was 17% above market prices on average, with significant regional variations. That means higher tax bills for buyers and people who are gifted or inherit property, as the ‘Reference Value’ is now the taxable base for all property taxes like ITP and AJD.

“76% of agents surveyed have been involved in sales where the cadastre’s reference value was higher than the real value of the sale recorded in the deeds,” explains the report from the FAI. It seems that at least one in five buyers is now hit by an inflated tax bill thanks to the ‘Reference Value.’

The study found that buyers in the Canaries and Galicia are being overcharged tax to the tune of more than 20% thanks to the new ‘Reference Value’, and close to 20% in Catalonia and the Valencian region. Buyers are being shafted the least in Extremadura and the Balearics, overpaying by around 11% on average. 

As I have explained in previous articles about the new ‘Reference Value’ produced by the Spanish cadastral office, the new system weakens the link between property values and taxes paid, allowing the government to squeeze more money out of buyers in a type of stealth tax that has nothing to do with ‘combating tax fraud’, which is the government’s main excuse for introducing the new method. If there is any tax fraud going on, it’s being committed by the Spanish government in this case.

“This new method means an unfair additional fiscal burden and expense for buyers, which will disincentivise them, and could shut down part of the market, especially first time buyers during a complicated economic period with inflation near historic highs,” the report’s authors argue.

They also point out that experts say the new method is confiscatory, and anti-constitutional, so its days might be numbered, as it might eventually be struck down by the constitutional court. But in the meantime, buyers just have to put up with being overcharged on taxes.

Note that new home buyers are not affected by this problem, as they pay VAT based on the purchase price, not the ‘Reference Value’.

One thought on “Buyers are getting hit with inflated property-purchase taxes confirms new study

  • johnmhughes@btinternet.com says:

    We have almost the same situation here in Wales with a communist inspired leader in cahoots with Plaid Cymru, who are busy trying their best to relieve property owners of their hard-earned cash.
    That is the trouble with Socialist Governments, they hate to think that you have been successful in life and will do anything within their power to give credence to their ideology.
    ‘You will own nothing and be happy’, that is their mantra.

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