Recent Supreme Court rulings declare that estimating the real value by reference to the cadastral value multiplied by correction coefficients is not suitable

In recent years, especially in those located closer to the epicenter of the real estate crisis, when settling those taxes in which the taxable base is determined by the real value of real estate (notably the Property Transfer Tax, as well as the Inheritance and Gift Tax), a serious discrepancy was revealed between the real value of these assets and the real value that the Administration attributed to them by reference to cadastral values ​​multiplied by indices or coefficients.

Thus, on many occasions the real value declared by the taxpayer, linked to a market value of the properties that had suffered a strong correction in prices, was lower than the real value estimated by the Administration based on that methodology established in article 57.1 b) of the General Tax Law.

Faced with this situation, the taxpayer only had two options: either maintain the real value in the tax settlement and settle the tax taking that amount as the taxable base and risk the Administration proceeding to review his settlement (with the well-known consequences that this may entail) or submit to the general criterion of the Administration and settle the tax from that estimated real value in order to avoid the consequences of confronting the Administration, even though this would imply a flagrant injustice.

Well, the path taken by some taxpayers in not submitting to the Administration's criteria has reached the Administrative Litigation Chamber of the Supreme Court, which, through the issuance of four judgments recently, has established doctrine with respect to this issue, establishing that the method of verifying the real value of real estate, for the purposes of calculating the Property Transfer Tax, which is made possible by the General Tax Law, consisting of multiplying the cadastral value by a coefficient, is not suitable or appropriate, unless it is complemented by a direct verification by the Administration of the specific property subject to valuation.

The Supreme Court's doctrine literally states the following:

“1) The verification method consisting of estimation by reference to cadastral values, multiplied by indices or coefficients (Article 57.1.b) LGT) is not suitable, due to its generality and lack of relation to the specific asset whose estimation is concerned, for the valuation of real estate in those taxes in which the taxable base is legally determined by its real value, unless such method is complemented by the performance of a strictly verification activity directly related to the individual property that is subject to valuation.

2) The application of the verification method established in article 57.1.b) LGT does not provide the Administration with a reinforced presumption of truthfulness and accuracy of the values ​​included in the coefficients, whether they appear in general provisions or not.

3) The application of such a method to rectify the value declared by the taxpayer requires that the Administration expressly state the reasons why, in its opinion, such declared value does not correspond to the real value, withoutthe mere discrepancy with the published general values ​​or coefficients by which the cadastral value is multiplied being sufficient to justify the start of the verification.

4) The interested party is not legally obliged to prove that the value shown in the tax declaration or self-assessment coincides with the real value, it being the Administration that must prove that lack of coincidence.”

Consequently, the Supreme Court essentially states that:

• It is the responsibility of the Administration to prove that the value declared by the taxpayer does not coincide with the real value, and this proof cannot be limited to the mere assertion that it does not coincide with the published values ​​or coefficients (which are not endowed with a presumption of truth), since these, due to their generality and lack of relation to the specific asset, are not suitable, but the Administration must make a specific and individualized verification effort.
• It therefore requires the Administration to make a probative effort aimed at sufficiently justifying the consideration that the declared value does not coincide with the real value.

The doctrine established by the Supreme Court is of great importance, and it may have a direct impact on those cases in which the taxpayer did not comply with the criteria of the Administration and the settlement carried out is currently still under discussion (in administrative or jurisdictional proceedings).

In cases where a tax assessment must currently be carried out where the taxable base is constituted by real estate, this doctrine must be taken into account, although the most advisable option for the taxpayer must be analyzed on a case-by-case basis.

If you need our help to obtain more information or have any questions, please contact us via email at ambit@ambitassessor or at our offices.

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Andreu Pujol i Camps

Professional Partner in legal and economic fields

A graduate in Law from the University of Barcelona and with a Master's degree in Business Law from the same university, he worked at the law firm Alonso-Cuevillas Advocats and later joined the Civil and Commercial Litigation department of the law firm Bufete Bueno Bartrina. He then joined the team at the firm Casamitjana-Cuyas-Morales, and subsequently continued his career at Bufete Herrera Advocats, in the Commercial and Litigation department. In November 2015, he joined aÀmbitJurídic i Econòmic, SLP, as a professional partner, to head the Commercial and Insolvency practice.

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