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Practical Heritage Manual 2021.

1. Real estate

Regulations: Art. 10 Wealth Tax Law

Real estate of both an urban and rural nature must be valued in the Wealth Tax in accordance with the following rules:

General valuation rule

Real estate of an urban or rural nature will be computed taking as reference the highest value of the following three:

  1. The cadastral value recorded in the receipt corresponding to 2021 of the Real Estate Tax.

  2. The value determined or verified by the Administration for the purposes of other taxes, such as, for example, the Tax on Property Transfers and Documented Legal Acts or the Inheritance and Donation Tax.

    New 2021: With effect from July 11, 2021, the rules for valuing real estate are modified to add as a value to be taken into account the “determined” by the Administration for the purposes of other taxes, which implies incorporating as a valuation criterion for real estate the reference value provided for in the consolidated text of the Real Estate Cadastre Law, approved by Royal Legislative Decree 1/2004, of March 5.

    Said reference value is determined by the General Directorate of the Cadastre, objectively and with the limit of the market value, based on the data in the Cadastre, as a result of the analysis of the prices communicated by the public notaries in the real estate sales carried out.

    However, the reference value will only affect properties that were acquired as of January 1, 2022, when said value has been taken as the tax base in the tax levied on its acquisition (that is, in the Property Transfer Tax and Documented Legal Acts or Inheritance and Donation Tax).

    These individualized reference values will be available in the Cadastre's electronic headquarters in 2022. The aforementioned headquarters will also offer the possibility of consulting and certifying the reference value of a property on a certain date.

  3. The price, consideration or acquisition value .

    Within the " acquisition value" referred to in article 10.One of the Tax Law on the Asset , the “expenses and taxes inherent to the transfer” that have been paid by the acquirer must be included. These are expenses and taxes “united by their nature or inseparable” from the transmission as such. An example of the first would be the notary and registration expenses and, of the second, the Tax on Inheritances and Donations, the Tax on the Added Value (VAT) or the Tax on Onerous Asset Transfers and Documented Legal Acts (ITPAJD), as the case may be.

    On the contrary, to determine the value of real estate in the Wealth Tax, in accordance with the rule provided for in article 10. One of Law 19/1991, on Wealth Tax, said value cannot be reduced in the amount of amortizations carried out within the scope of Personal Income Tax .

Special valuation rules

  1. Properties that are leased as of December 31, 2021

    Leased urban properties will be valued in accordance with the general rule previously mentioned.

    However, homes and business premises leased through contracts entered into before May 9, 1985 will be valued by capitalizing the rent accrued in the year 2021 at 4% , provided that the result is lower than what would result from the application of the general rule for valuing real estate. 

    See in this regard the second and third transitional provisions of Law 29/1994, of November 24, on Urban Leases ( BOE of 25).

    For these purposes, this formula can be used to calculate the capitalization of income:

    Computable value = Earned income x (100 ÷ 4)

  2. Properties under construction

    Properties that are in the construction phase will be valued by the amounts that would have actually been invested in said construction until the date of tax accrual (December 31). The corresponding equity value of the lot must also be computed.

    In the case of horizontal property, the proportional part of the value of the lot will be determined according to the percentage established in the title.

  3. Properties acquired on a time-shift basis

    The right of temporary use of real estate grants its owner the power to enjoy, on an exclusive basis, during a specific period of each year, consecutive or alternate, accommodation that can be used independently because it has its own exit to a public road or to an element common of the building in which it is integrated and which is permanently equipped with the appropriate furniture for this purpose, as well as the right to provide complementary services.

    This right, which is currently regulated by Title II of Law 4/2012, of July 6, on contracts for the timely use of goods for tourist use, for the acquisition of long-term vacation products, for resale and exchange, and regulations tax ( BOE of 7), can be constituted as a limited real right or with an obligatory nature (in this case, as a seasonal rental contract for vacation real estate) and is valued, whichever its nature (real or obligatory) by the acquisition price of the certificates or other titles representing them.

    Note: Keep in mind that, regardless of whether the rights of temporary use of real estate must be valued at their acquisition price, when it is a real right it must be declared in section “M” (Real rights of use and enjoyment) of the model D-714 of the Wealth Tax, and when it is mandatory in section “Q” (Other assets and rights of economic content) of the aforementioned model.

  4. Right to bare ownership of real estate

    The value of the right of bare ownership, will be computed by the difference between the total value of the asset and the value of the usufruct that has been established over it . In the event that the real right that falls on the property is a lifelong usufruct that is also temporary, the bare property will be valued by applying, among the usufruct valuation rules, the one that attributes the lowest value to the bare property.

    To determine the value of the usufruct constituted over the property, you can see the valuation rules contained in the section relating to " Real rights of use and enjoyment (excluding those that, where appropriate, fall on the habitual residence of the taxable person)" of this same Chapter.