The new reference value, applicable from 1 January 2022, has become a very important point to review when you want to buy a property and it is recommended to do so before signing any reservation, option or deposit contract.
According to the recent legal modification, the taxable base for calculating the tax derived from the purchase of a second-hand property (ITP) is now determined by the higher of the two following values: the purchase price and the reference value. This means that the purchaser has two options when it comes to paying the purchase tax:
- To do it as the law says: paying for the higher of the two values (the reference value or the purchase price).
- Do it for the purchase value, even if this is lower than the reference value.
The problem that is arising is that on many occasions we find that the reference value is higher than the purchase value (something that rarely happened before) and this could mean a difference of several tens of thousands of euros when it comes to paying the tax.
With the new system the administration fixes the value based on the prices declared in the purchase deeds in the area where the property is located.
Therefore, the problem with option A, when the reference value is higher than the purchase price, is that the buyer will be paying transfer tax for a value fixed by the administration and not for the purchase price, which means an extraordinary expense that the buyer may not have taken into account if he did not check the new reference value before signing the deposit, reservation or option contract.
In the most serious cases, if the buyer does not have sufficient financing to pay the difference, he will have to choose between withdrawing from the contract, with the economic and emotional loss that this entails (remember that normally the price of the deposit, option and reservation is 10% of the sale price), or opting for Option B, knowing that the administration will initiate a value verification process and it will be the buyer who will have to defend himself by providing the means to justify why the reference value is unfair and higher than the purchase value, with the consequent economic cost of these processes, the wear and tear of uncertainty and the risk of losing the appeal and having to pay the difference in tax plus the appropriate interest and penalties, which he may not have the money to pay in the future either.
What we recommend to our clients who encounter this problem is that whenever financially possible they should pay the tax on the higher value as the law states, but in the event that the purchase value is lower than the reference value, they should have an official valuation carried out for tax purposes and if the property is in poor condition, a notarial deed should be drawn up in order to prove it. If the official valuation shows that the reference value is significantly higher than the purchase value, then you will have to request a refund from the administration. The good thing about this route is that in the event that the administration does not agree with the buyer, the buyer will not be obliged to pay the high fines and interest.
It should be borne in mind that this new reference value does not affect the seller’s personal capital gain (IRPF) and that not all properties have the reference value yet.
If you want to check if your property is affected, you can check here or contact us. It should be taken into account that this value is renewed every year.
Lawyer