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Tax Changes on Properties in 2020

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Written by Daniella

The Law on Measures of the Prevention of and Fight against Fiscal Fraud is a new regulation (in approval phase), launched by the Government that is led by Pedro Sánchez.

This new regulation results in tax increases in real estate operations in terms of Transfer Tax, Personal Income Tax, Property Tax and Inheritance and Gift Tax. Today’s article by ShMadrid will tell you more about it.

Related article: What is Happening on Madrid’s Real Estate Market in 2020?

Tax changes on properties in 2020 you might not yet be aware of

The tax rate for the Inheritance and Gift Tax and the Property Tax will no longer be based on the real value of the property, but on the market value. This means the value established with the Cadastre is the one that will be used for tax purposes. Some Autonomous Communities already use the value with the Cadastre to carry out relevant checks to see if taxes have been paid correctly.

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This means Tax Authorities will no longer have to visit each property that has been inherited, donated or sold, but that the tax will be calculated over the value approved by the Cadastre. As some experts are now pointing out, the market value is compared with prices from other similar transactions, without taking special circumstances into account, like building materials, the state the property is in, whether it has been renovated, etc.

So when you inherit or buy a house or someone gives you property, you must pay your taxes. It affects Property Tax, Transfer Tax and Inheritance and Gift Tax. From now on there are four elements to consider when doing your Personal Income Taxes: the cadastral value of a property, the acquisition price, the one verified by the Administration, and the one verified by the Cadastre. This measure will affect people who own real estate with a very low cadastral value or very low acquisition price, as now they must pay mandatory taxes.

Related article: Administrative Agencies in Madrid

The Cadastre’s reference value will motivate a tax payer to take action when appropriate or necessary. He now has to provide evidence that the inherited or purchased property has a lower market value than the value at the Cadastre.

form to fill out

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The future Law against Fiscal Fraud is also contemplating the elimination of fiscal benefits in inheritance agreements when it comes to Personal Income Tax. This new regulation will result in the person receiving property as a gift before the death of the benefactor paying income tax on property that is then sold, taking into account its acquisition price and not its current value. (Years ago this would have cost much less…)

The blueprint of this law also provides for the verification of property values, in order to have both the buyer and seller of the property notified. In the end, when tax authorities discover that the value in the deeds is not the same as the market value or value with the Cadastre, the seller will be paying more income tax.

It must be said that this new law, of which the text had already been approved in October 2018, has come with a lot of surprises. Given the situation of political instability in the past new regulations had been delayed, but now they are here, and its main objective is to modify taxes on real estate operations to raise more money.

What is your opinion on property tax changes?

About the author


Daniella loves to write and translate. Her bucket list is filled with beautiful places she still needs to visit.

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