Beatriz inherits from her father a flat in the Tetuán district of Madrid. The Catastro (the Spanish land registry for tax purposes) gives it, on its online portal, a reference value of 310,000 €. Two estate agents tell her that, with a kitchen and bathrooms from 1975 and on the fourth floor without a lift, it will not sell for more than 270,000 €. Her first idea is to declare 270,000 € and save tax. Her second, more prudent, is to ask what happens if she does. The answer has two parts: today's, in the inheritance tax, and tomorrow's, when she sells.
The general rule: the reference value
Article 9.3 of Law 29/1987, the Spanish inheritance and gift tax law, as worded by Law 11/2021, provides that the value of property is its reference value under the cadastral rules on the date of accrual, that is, the date of death. If the value declared by the heir is higher, the declared value is taken.
Three practical consequences:
- Declaring below the reference value does not work. The taxable base will be at least the reference value, and a self-assessment that declares less will be corrected.
- Declaring the reference value closes the door to a value check. Article 18.1 prevents the authorities from checking the value of a property when the base is its reference value or a higher declared value.
- Without a reference value, because the property has none or the Catastro cannot certify it, the base is the higher of two figures: the declared value or market value. Here a value check is possible, which we deal with in what to do about a value check.
The reference value can be looked up with the cadastral reference on the Catastro's online portal, which lets you obtain a certificate as at a specific date.
How the reference value is challenged
Article 9.4 limits the routes: the reference value can only be challenged when appealing the assessment issued by the authorities or when requesting the correction of your own self-assessment. There is no direct appeal against the value before filing.
The practical procedure for Beatriz would be:
- File and pay using the reference value of 310,000 €.
- Request the correction of her self-assessment, arguing that the reference value harms her interests, with evidence of the flat's real condition: a valuation report, photographs, refurbishment quotes, advertisements for comparable properties.
- The authorities decide after a mandatory and binding report from the Dirección General del Catastro (the directorate-general that runs the Catastro), which confirms or corrects the value with reasons (article 9.5).
- If the Catastro corrects it, the overpayment is refunded with interest.
It is neither a quick step nor one with an assured outcome. The Catastro starts from its modules and reduction factors; the value is challenged with evidence about the specific property, not with general market opinions.
Tomorrow's effect: the gain on a sale
Here is what almost nobody calculates. Article 36 of the Income Tax Act (IRPF) sets as the acquisition value of an inherited asset the value resulting from the inheritance tax rules, not exceeding market value. The value declared today is tomorrow's tax cost. The lower it is, the larger the gain on a sale.
Suppose Beatriz is the sole heir, the flat is the only asset, she applies the State scale with the group II reduction and she sells in three years for 330,000 €:
| Item | Declares 310,000 € | Manages to lower it to 270,000 € |
|---|---|---|
| Net taxable base (after 15,956.87 €) | 294,043.13 € | 254,043.13 € |
| Inheritance tax | 53,947.81 € | 43,747.81 € |
| Gain on selling for 330,000 € | 20,000 € | 60,000 € |
| Income tax on savings on that gain | 4,080 € | 12,680 € |
| Total of both taxes | 58,027.81 € | 56,427.81 € |
The income tax calculation uses the savings scale in articles 66 and 76: 19 % up to 6,000 €, 21 % up to 50,000 € and 23 % up to 200,000 €. With 20,000 €: 1,140 + 2,940 = 4,080 €. With 60,000 €: 1,140 + 9,240 + 2,300 = 12,680 €.
On the State scale, lowering the value saves 10,200 € today and costs 8,600 € tomorrow: the net saving is 1,600 €, before paying for the valuation and the time the procedure takes.
If the applicable region relieves almost all the inheritance tax for the heir, lowering the value barely saves any tax today but does increase the income tax gain on a sale. In that scenario the opposite happens: it may be worth declaring a value higher than the reference value if it is justified as market value, because article 9.3 allows it and article 36 of the Income Tax Act accepts it as acquisition value up to market value. Always with a valuation to back it up.
Other pieces of the value
- Charges and debts. The deceased's outstanding mortgage is a debt deductible from the base (article 13), not a lower value of the property.
- Usufructs. If the house is inherited as bare ownership because the widow or widower has the usufruct, the reference value is divided using the rules in article 26.a).
- Undivided shares. Each heir declares their percentage of the full reference value.
- Several heirs, one value. If the flat is shared among siblings, all of them must declare the same total value. One challenging and another not creates contradictory files; article 134.5 of the General Tax Law extends to the others the value resulting from one heir's challenge where the law so provides, but it is better to decide together.
- Household contents. Spanish inheritance tax also includes a presumed amount for household contents; how it is calculated and how it can be challenged have their own rules, which should be reviewed under the applicable legislation.
Which documents to prepare
To declare safely, the certificate of reference value at the date of death is enough. To challenge it you need: a valuation from an approved valuation company or an architect's report, a photographic record, refurbishment quotes and comparable market evidence. The guide to valuing assets in an inheritance also covers how accounts, funds and shares are valued.
The correction does not have to be requested on the day you file. As long as the right to request a refund has not become time-barred, which article 66 of the General Tax Law sets at four years, the evidence can be prepared calmly. What is advisable is to commission the valuation as soon as possible, because it must refer to the date of death, and the more time passes the harder it is to reconstruct the state of the flat on that day, especially if it is refurbished in the meantime.
If you are unsure whether to declare the reference value or challenge it, send us the cadastral reference, the condition of the property and your plans to sell through the inheritance form. We calculate both scenarios under your region's rules; the decision to challenge is yours and the outcome depends on the Catastro.
Beatriz declared the reference value. With her region's relief, lowering it would have saved her little in inheritance tax and cost her more in income tax on the sale she already has planned.
The same logic applies to non-resident heirs who will sell the property; their sale also has its own rules, which we deal with together with the inheritance at Salama Tax for inheritance and gifts.