Heirs must use the cadastral reference value for Inheritance Tax

The determination of the taxable base for Inheritance and Gift Tax (ISD) regarding real estate has raised doubts following the implementation of the reference value. The Dirección General de Tributos (DGT) has clarified the applicable criteria to avoid discrepancies in the settlement of the tax.

What the DGT has ruled

The advisory body determines that, in accordance with current regulations, the taxable base for real estate shall be the cadastral reference value. However, there is an operational exception: if the interested parties declare a value higher than the reference value, said higher value must be used for the tax calculation.

Furthermore, the DGT clarifies that the existence of a maximum sale price established by an administrative regime does not alter this rule. The purpose of the reference value is to reflect the market value and, therefore, it cannot exceed it. In the event that the application of the reference value harms the legitimate interests of the taxpayer, the channels for challenge or request for rectification remain available.

What this means for you

If you are an heir to a real estate property, the administration will automatically use the cadastral reference value to calculate the amount of tax you must pay. This implies that:

• The cadastral value is the minimum required by the Administration.
• If the market value is higher than the reference value, the declaration must reflect that higher value.
• The reference value is not an unchangeable figure if it can be demonstrated that it does not reflect market reality.

What should be done

In the event of an inheritance that includes real estate, it is necessary to compare the cadastral reference value with the actual market value of the property. If the reference value proves to be excessive or does not adjust to the economic reality of the property, the possibility of filing a claim or requesting the corresponding rectification should be evaluated to protect the interests of the inherited assets. Each patrimonial situation must be analyzed to ensure that the taxable base is correct.