Javier inherited from his father 40 % of a family limited company that runs two storage warehouses in Alcalá de Guadaíra. In the Spanish inheritance tax (Impuesto sobre Sucesiones y Donaciones, ISD) he declared his shares at 180,000 €, based on the company's book net assets. Fourteen months later he receives a proposed assessment: the authorities value them at 245,000 € on the strength of a report by their own valuer and ask him for the difference in tax plus late-payment interest. Javier has the letter in his hand and the usual question: appeal, pay or ask for another valuation?
Which assets can be checked and which cannot
A value check is the procedure through which the authorities review the value the taxpayer declared. Article 18.1 of Law 29/1987 allows it using the methods in article 57 of the Spanish General Tax Law (valuers' reports, average market prices, stock market prices, values in tax registers, among others), except for property whose base is its reference value or a higher declared value. If you inherited a flat and declared the reference value, no check is possible; the problem there is a different one and we deal with it in what value to put on the inherited house.
The usual ground for value checks is: shares in unlisted companies, property without a certifiable reference value, businesses, works of art, collectors' vehicles and debts owed to the deceased. For shares, the guide market value of unlisted shares explains the methods that tend to clash.
First of all: are reasons given?
Article 134.3 of the General Tax Law requires the proposed valuation to be communicated with proper reasons, stating the methods and criteria used. It is not enough to say "according to a valuer's report, 245,000 €". The report has to explain which method it used, which specific company data it took, which comparables or which projected cash flows, and why it rejects the declared value.
Read the proposal looking for three things:
- Identification of the asset. Does it value exactly Javier's shares, or the whole company without applying the 40 %? Does it take into account that it is a minority holding?
- Method and data. Does it cite balance sheets, valuations of the warehouses, leases? Are they from the date of death or later?
- Visit or inspection. Did the valuer see the warehouses or value them from a desk?
A valuation without sufficient reasons can be annulled on appeal. Article 135.1 even allows you to reserve the right to request a contradictory valuation when the appeal complains about the lack of data and reasons.
The deadlines: one month, and options that exclude each other
After the proposal there is a period for submissions. Then the authorities notify the assessment with the valuation. From that moment the calendar is short:
| Option | Deadline | What it achieves | Legal basis |
|---|---|---|---|
| Submissions on the proposal | The period stated in the notice | Correcting errors before the assessment | Art. 134.3 LGT |
| Appeal for reconsideration | One month from notification of the assessment | The same office reviews it, including the reasons | Art. 223 LGT |
| Economic-administrative claim | One month from notification | An administrative tribunal reviews it | Art. 235 LGT |
| Contradictory valuation | Within the period for the first appeal or claim | Your own valuer against the authorities' and, if they differ a lot, a third one | Art. 135 LGT |
LGT is the General Tax Law. There is no separate appeal against the valuation (article 134.3): it is challenged when appealing the assessment or through the contradictory valuation. Requesting that valuation suspends enforcement of the assessment and the period for appealing, as well as that of any penalty procedure.
How the contradictory valuation works
Article 135 sets up a mechanism with arithmetical rules:
- The taxpayer appoints and pays their own valuer, who issues a valuation.
- If the authorities did not value with their own valuer, they appoint one now.
- If the difference between the two valuations is 120,000 € or less and 10 % or less of the taxpayer's valuation, the taxpayer's valuation stands.
- If it is larger, a third valuer is appointed by lot from the lists of the professional associations, or a valuation company is appointed through the Banco de España.
- The third valuer's figure is final, within the limits of the declared value and the value initially assessed.
- The third valuer's fees are paid by the taxpayer if that valuation exceeds the declared value by more than 20 %; otherwise, by the authorities.
Javier's case, step by step
- Declared value: 180,000 €. Assessed value: 245,000 €.
- Javier requests the contradictory valuation within a month of the assessment. His valuer, an economist, values the shares at 190,000 €, applying a minority discount.
- The authorities' valuer puts the figure at 235,000 €. Difference: 45,000 €.
- Is it 120,000 € or less? Yes. Is it 10 % of 190,000 € (19,000 €) or less? No. A third valuer is needed.
- The third valuer puts the value at 215,000 €.
- Limits: between 180,000 € and 245,000 €. It is accepted. New base: 215,000 €.
- Who pays the third valuer? The difference from the declared value is 35,000 €, and 20 % of 180,000 € is 36,000 €. It is not exceeded: the authorities pay.
Result: Javier is taxed on 35,000 € more than he declared, not 65,000 € more. If the third valuer had said 220,000 €, the difference (40,000 €) would have exceeded 20 % and the fees would have been his.
A contradictory valuation is neither free nor certain in outcome. You have to pay your own valuer, deposit the advance on the third valuer's fees if requested (within ten days; failing to do so means accepting the other side's valuation) and accept that the third valuer may come in close to what the authorities said. Before starting one, it is advisable to have a prior valuation indicating that the declared value can be defended.
Penalties and interest
The difference in tax carries late-payment interest from the end of the filing deadline. As for penalties, article 18.4 of Law 29/1987 excludes a penalty on the part of the tax arising from the higher assessed value when the taxpayer followed the valuation rules of the Spanish wealth tax in their return. Declaring on a reasonable, documented technical basis is the best protection.
The assessed value also has side effects: under article 18.3, if it is higher than the value resulting from the wealth tax rules, it is used in that tax for the current year and those that follow. And it will set the acquisition value for income tax (IRPF) if Javier sells his shares one day.
What not to do
- Letting the month go by waiting "to see if another letter arrives". The assessment becomes final.
- Filing an appeal and requesting a valuation without a strategy. They are compatible in time, but each has its own logic; it is best to decide which to use first.
- Providing a valuation dated after the death without explaining how it relates to that date.
If you have received a proposal or assessment with a value check, send us the full notice and what you declared through the inheritance form. We review the reasons and the deadlines and explain your options; we do not guarantee the outcome of the appeal or the valuation. For general guidance on letters from Hacienda, as the Spanish tax office is commonly called, there is the guide what to answer and what not to.
Javier paid the difference in tax on 35,000 € with its interest and kept the third valuer's report for when he sells.
Value checks on inheritances of non-residents, which the State's Agencia Tributaria (the Spanish tax agency) manages, follow the same rules; we deal with them at Salama Tax for inheritance and gifts.