Cadastral value prevails over market value in Inheritance Tax
The valuation of real estate in Inheritance and Gift Tax (ISD) is one of the main points of friction between taxpayers and the Tax Administration. A recent ruling from the Directorate General of Taxes (DGT) has clarified the hierarchy of valuation criteria applicable in these cases.
What the DGT has resolved
The issue raised focused on the possibility of rectifying the valuation of an inherited property in order to adapt it to the economic reality of the asset, instead of using the values established by the Administration. The DGT has resolved that, in accordance with current regulations, the Cadastral reference value prevails over the market value for the determination of the tax base.
This criterion is based on the application of the Inheritance and Gift Tax Law (LISD), the General Tax Law (LGT), and the General Tax Administration Regulation (RGAT). The resolution establishes that the cadastral reference value is the objective parameter that the Administration requires for the calculation of the tax, limiting the heir's discretion to propose lower values based on market reality.
What this means for you
If you have inherited a property, this criterion has a direct impact on the calculation of the amount you must pay for the tax. It is not possible to make adjustments to the valuation of the asset based solely on market arguments or the state of conservation of the property if these contradict the Cadastral reference value. The Administration will use this value as the basis for the settlement, which may result in a higher tax burden if the market value is lower than the cadastral value.
What you should do
In an inheritance situation, it is necessary to precisely verify the cadastral reference value of the property before proceeding with the tax settlement. Since the regulations are strict regarding the prevalence of these values, it is fundamental to analyze the patrimonial situation on an individual basis. It is recommended to assess each particular case to understand how the application of the LISD and the RGAT will affect the final tax settlement.
Frequently asked questions
- Can I declare a value lower than the Cadastral value if the property is deteriorated?
- According to the DGT's criterion, the Cadastral reference value prevails over the economic reality or the market value.
- Which regulations govern this valuation?
- The valuation is governed by the Inheritance and Gift Tax Law, the General Tax Law, and the General Tax Administration Regulation.