The cadastral reference value is the value that the Directorate General for the Cadastre establishes for each property in order to use it as the taxable base for calculating certain taxes. This value is updated annually based on market statistics. It should not be confused with the ordinary cadastral value, as the latter is an administrative value calculated for each property for purposes such as the Property Tax (IBI) and is updated by the General State Budget (PGE).
However, since the entry into force of «Law 11/2021, on measures for the prevention and fight against tax fraud», the cadastral reference value is used for the calculation of the Property Transfer Tax (ITP), Documented Legal Acts (AJD), Inheritance and Donation Tax, and even the Wealth Tax.
In the case that concerns us here, which is none other than real estate transactions subject to ITP tax, the higher of the following values will always apply:
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- The amount stated in the purchase agreement
- The cadastral reference value
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So far, so good; the problem arises when that cadastral reference value is clearly higher than the property’s market value. Why? Very simple: because the buyer will pay more in taxes than they should, not only now, but also in future transactions such as inheritances or donations.
Well, the reality is that the cadastral reference value can be challenged. However, the best course of action is to pay the tax to avoid surcharges and then file a claim. Unless there is conclusive evidence to the contrary, the value set by the Directorate General of the Cadastre will be presumed valid. Therefore, for such a claim, the buyer must provide evidence proving that this value is higher than the market value. This evidence must include a corresponding expert appraisal prepared by an official technician who has visited the property and detailed the reasons justifying the challenge, demonstrating with objective criteria that the cadastral reference value attributed to the property does not reflect its actual market value.
There are 2 ways to do it:
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- Submit a corrected self-assessment (there is a 4-year deadline)
- File an appeal if you have already received the tax assessment (the deadline is 1 month)
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If the challenge to the cadastral reference value is accepted, the taxable base for calculating taxes will be corrected, and any overpayments will be refunded by the Tax Agency. Furthermore, this will prevent such overvaluation from being carried over to future transfers, inheritances, donations, or income tax calculations.
However, if the appeal is dismissed, the cadastral reference value will remain in place, although the legal route will still be open, allowing for a claim to be filed with the Regional Economic-Administrative Court (TEAR). As a last resort, the matter can be taken to the Courts of Justice.
