The draft Law on Measures for the Prevention and Combating Tax Fraud is currently in the parliamentary approval phase and will be back on the table of the Government led by Pedro Sánchez. It is a regulation that, once approved, will bring a tax increase in real estate transactions in the IRPF, ITP, Inheritance and Donation Tax and in the Estate Tax. Here’s what this tax hack is going to be.

In autumn 2018, the Draft Law on Measures for the Prevention of Tax Fraud was known, which advocated modifying the tax base of the ITPAJD and the Inheritance and Donation Tax (ISyD), so that it will no longer be the real value of the properties , but its market value, understood as the most likely price at which the property could be sold. But this rule contemplates many more things. We are going to undo it with José María Salcedo, partner of the law firm.

Changes in the valuation of properties for the ITP and ISyD

The tax base of these two taxes will no longer be the actual value of the properties, but their market value. And it is presumed that this is the reference value approved by the Directorate General of the Catastro. In fact, Castilla La Mancha since 2015 already uses this new reference value to motivate its securities checks, that is, the checks that the CCAA does to see if the LPI has been properly paid for the purchase of a property or the ISyD for inheritance or donac ion of a property.
That is, the autonomous Treasury will no longer visit or an on-site check of the property sold, inherited or donated, but the tax base will be that reference value approved by Catastro.
This market value will be calculated from prices of real estate transactions, according to information provided by Notaries and Registrars, so there will be no need to visit the property and therefore there will be no need to know the state of conservation, materials used, whether it is reformed or not, etc.

As mentioned, this new market valuation will be the reference value of Catastro and will therefore affect both the ITP, the ISyD and the Estate Tax. Thus, the taxpayer must tax for that value when buying, inheriting or receiving a home in donation.
“In the Estate Tax, taxpayers must currently declare the properties of their property according to the greater of these three values: cadastral, the checked by the Administration or the acquisition. The adoption of the new Law will add a fourth value, that of Reference of Catastro”, notes José María Salcedo. This new market value will affect those who have properties with a very low acquisition or cadastral value, as they will be obliged to tax, when before they did not have to.
This official reference value approved by Catastro is further presumed true, unless proven otherwise. In this way, the taxpayer will be obliged to prove that the property purchased or inherited has a lower market value than the Catastro says. That is, the burden of proof will be moved, since until now the Administration must prove what the actual value of a property is if it was different from that fixed by the taxpayer. With the new regulations, once this burden of proof takes effect will be borne by the taxpayer.
Thus, it may be the case that the autonomous estate requires the purchaser of a cheap house or the heir of a house to pay more than the one initially paid. The reason is that they value houses above the price deeded to a notary.

Changes in the IRPF in the case of the succession pact

The future Anti-Tax Fraud Act provides for eliminating the tax benefit of succession pacts in the IRPF.

Succession pact allows the ordering of future inheritance through a contract, as well as attributing property or rights to family members before death. The main advantage is that it is only taxed on the Inheritance and Donation Tax and not in the IRPF.
Under the new regulations, if approved, the purchaser of the properties by succession agreement must be taxed in the IRPF, if it transmits the goods before the deceased dies.
Let’s look at it with an example:
Let us think of a property acquired by the denoate for 200,000 euros years ago, and transmitted by succession pact for its current value (450,000 euros). Until now, that property could be transferred before the cate died by computing as acquisition value the eur 450,000. Thus, if before the causative died, for example, for 500,000 euros, the profit obtained, and for which it was to be taxed in the IRPF, was only 50,000 euros.
However, with the legal amendment to be approved, the transfer of that property before the death of the denoate will mean that the acquisition value is 200,000 euros. This will significantly increase the equity gain for which this taxpayer will be taxed. In the proposed example, this profit would be 300,000 euros (500,000 euros minus 200,000 euros).

The securities check will also reach the seller of the property

The Preliminary Draft Law also provides that the securities check notified to the purchaser of a home below the official value also reaches those who sold or transmitted the property (donations or inheritances).
That is, Hacienda will apply the new valuation both to the one who transmits the house, and to the one who acquires it. In the case of sellers, they will have to pay more IRPF because The Treasury considers that the deed value is not the market value (i.e. the reference value of Catastro).
“In addition, these cross-value checks could also have an impact on municipal capital gains tax. Transmissions made in losses, and which therefore did not tax, could overcourse be forced to tax, as a result of a new administrative assessment, imposed on the seller. However, the estimate of the appeal which, against administrative valuation, by buyer or seller, will take advantage of both. At least Hacienda fosters solidarity between the two, persecuted for the same cause,” says lawyer Salcedo.