The Spanish Constitutional Court has admitted the constitutionality amendment brought by the High Court of Justice of Andalusia against the use of the Cadastral Reference Value as the tax base for calculating the Property Transfer Tax (ITP).
This has legal consequences. For example, it jeopardizes those ITP assessments and self-assessments in which this value was used as the tax base, until the Constitutional Court issues a ruling. And, if the challenge is ultimately declared unconstitutional, it will be the taxpayer who must request rectification of the self-assessments in which they paid tax according to the reference value, and appeal the assessments notified for this reason.
Regarding the possibility of rectifying self-assessments and appealing Inheritance and Donation Tax (ISyD) assessments in which the Cadastral reference value was used as the tax base, this could be considered, but it should be noted that the provisions of this tax are not currently threatened with unconstitutionality, as the constitutionality amendment raised by the High Court of Justice of Andalusia does not address it (though it seems logical to assume that, in the event of a declaration of unconstitutionality affecting the Property Transfer Tax (ITP), the Inheritance and Donation Tax (ISyD) will also be affected, as it is a value applied to both taxes).
It should be noted that starting in 2022, when purchasing a used home or receiving a property through inheritance or donation, the tax is charged on the highest value between the registered value and the cadastral reference value. In the case of the latter, it is set by the General Directorate of Cadastre based on market statistics from the previous year. And this is where the problem arises: we often find cadastral reference values that are much higher than those for the same properties on the market.
The calculation of the Cadastral reference value for a property is based on unrepresentative statistics from previous real estate transactions, and instead, objective and determining factors are ignored in order to produce an appraisal more in line with its real market value (the property’s usable area, condition of the building, quality of its materials, etc.). Thus, the reference value could lead to taxation on fictitious income, as already occurred with the so-called plusvalía municipal (Tax on the Increase in the Value of Urban Land), whose calculation method was declared unconstitutional for this reason. That is, it taxed potential and fictitious income whose taxable base did not correspond to the profit or income actually obtained, thus violating the principle of economic capacity established in Article 31.1 of the Spanish Constitution.
