Always check when buying

Minimum tax value for Spanish properties

21 / Dec

Since the beginning of year 2022, Spain has been applying a new method to determine the minimum tax value for a property. This new system results in values that are generally higher and much closer to the actual market value than before, making it considered ‘fairer’ by the Spanish tax authorities.

This value is not the value shown in the WOZ register, or el catastro, but a value that can be requested at catastro.

When buying a property in Spain, it is important to check the minimum tax value. This is because the Spanish Tax Administration uses this value when calculating transfer tax.

Usually, the minimum tax value is lower than the market value and therefore, in most cases, also lower than the purchase price. However, it can happen that the purchase price is lower than the minimum fiscal value, e.g. if you buy a property from a bank and sometimes the minimum fiscal value is simply not realistic.

In case the purchase price is lower than the minimum tax value, the tax authorities will levy the transfer tax on the minimum tax value and not on the lower purchase price. This could mean that you therefore pay more transfer tax than is actually necessary based on the purchase price:

Example 1

Suppose you buy a property for €200,000.00, but the minimum tax value is €250,000. Then in Alicante province, you will pay 10% transfer tax on €250,000.00, which is €25,000, and not on the purchase price of €200,000.00, which is €20,000.00. That’s €5,000.00 more!

Example 2

You buy a property with a garage. The purchase price of the house is 200,000.00€ and the price of the garage is 15,000.00€. Here, you would actually pay 20,000€ transfer tax on the house and 1,500.00€ on the garage. However, if the minimum tax value of the garage suddenly turns out to be €30,000.00, you can play with both values by, for example, reducing the purchase price of the house by €15,000.00 as long as it remains above the minimum tax value of the house. In the notarial deed, you can then register that you buy the house for €185,000.00 and the garage for €30,000.00.

Do be aware that if you buy with a mortgage your bank may not accept this. It is also important to bear in mind that the purchase price is taken into account to calculate the profit tax on sale. The seller may also not accept this in view of the profit tax the seller has to pay.

Filing an objection

It is possible to object to the determined minimum tax value. As the owner, you can do this before the moment of sale to avoid discussion with the buyer about this value. However, most sellers see this as the buyer’s problem.

Even after the transfer, the new owner can object to this value. You can choose to submit the tax return based on the purchase price and then start a discussion with the tax authorities. If you are then not ruled in your favour, the tax authorities will only levy an after-tax penalty interest. Therefore, most people choose to pay the transfer tax on the minimum tax value that is higher than the purchase price, and then file an objection against this value with an appeal for a refund of the overpayment.

Ilonka Dekker