Discover the difference between cadastral value and market value

Cadastral value of a property

The cadastral value of a property is an administrative value that is calculated through a series of parameters established by the municipality where the corresponding property is located. The cadastral value is, in turn, part of the real estate cadastre, which is a administrative register which depends on the Ministry of Finance and Public Administrations, where urban, rustic and special characteristics properties are registered. In this register, the characteristics of the property are defined, such as the owner of the property, location, surface area, use, graphic representation and cadastral reference.

Calculations of the cadastral value of a property are carried out by qualified technicians without anyone else being involved in this valuation. However, if the owner does not agree with the value established by the cadastre, he/she can request a second opinion and initiate a claim process called cadastral discrepancy.

Also, cadastral values are periodically updated by means of new coefficients by means of new coefficients ratified by the General State Budget Law. In fact, in 2018 a modification was introduced to the cadastral valuation, with a new system based on actual transactions in the real estate market. In principle, it was thought that this would mean a rise in the cadastral value and, therefore, in the taxes associated with it (mainly IBI), but the Treasury announced that it was a cadastral reference value, and that this was different to the cadastral value, so it would not have an impact on taxes. The aim of this revision was to promote transparency and strengthen legal certainty, as well as to serve as a tool for greater control of fraud.

Capital gains and cadastral value

Real estate tends to increase in value over timethis is why property owners often sell their property for more than they bought it for. From this supposed benefit arose the Municipal Tax on the Increase in the Value of Urban Land, better known as capital gains tax (Impuesto Municipal sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana).

The capital gains tax is a tax on the profits obtained when a property is sold, inherited or received as a donation.

In order to calculate the capital gains tax, it is necessary to know how much the value of the land has increased and what rate of taxation is set by the local council. With these data, the full amount can be determined.

The capital gain and the cadastral value of the land are therefore linked concepts, since the cadastral value of the land - present in the IBI receipt - must be consulted in order to calculate the capital gain.

In order to find out how much the value of the property has increased, the revaluation rate established by the local council of the municipality where the property is located. This rate is annual, so it must be calculated for each year in which we have owned the property, and the capital gain is applied to this increase in value, which is unique in each municipality, although in no case can it exceed 30%.