Have you inherited an apartment and need to value it? It is quite common when a person dies for their heirs to receive real estate. The taxes that must be paid for the inheritance, such as the Inheritance and Donation Tax, require knowing how to value a property for an inheritance. In this post we tell you all the details so that you know what value to give the property and what taxes you will have to pay.
The value given to a property is important because it will determine whether we pay more or less in taxes. This value has been the subject of a regulatory modification that was approved in 2021 and began to be applied in January 2022 (law 11/2021 on the fight against tax fraud). We see it below.
Learn how to value a property for an inheritance: the reference value
Until January 2022, the property transfer tax and inheritance and gift tax calculated the value of a property based on the real value of said property at the time it was acquired. However, since January 2022 the so-called market reference value (VRM) has been applied.
To know the market reference value, you must access the official page of the real estate registry and consult the data through the national identity document or digital certificate. It will be enough to enter the cadastral reference of the property and the market reference value will be obtained to use it in the valuation of properties for the Inheritance Tax, the wealth tax and the property transfer tax. However, this new way of valuing real estate will not affect real estate tax or personal income tax, in which the cadastral value will continue to apply.
What happens if the heirs want to sell the inherited real estate?
It is quite common that when several people receive a property as an inheritance they decide to sell it. In this case, they must pay in their income tax return for the capital gain obtained, which will be the difference between the value given to the asset in the inheritance and the value given in the transmission, that is, the price. of the sale that is made. In this case, the expenses derived from the sale must also be taken into account, but, above all, we cannot forget that if the property is valued in the inheritance at a value much lower than the market value, the amount to be paid for the capital gain will be high. In these cases, for example, the possibility of assigning the property a value higher than the reference value should be studied to reduce the tax burden.
What is the difference between the cadastral value and the reference value?
The two values are different. We see it below:
– Cadastral value of a property. It is the value that serves as the tax base to calculate the real estate tax (IBI). This is a value that is updated with the State’s general budget law.
– Market reference value. It is the value established annually by the General Directorate of the Real Estate Cadastre, based on the analysis of the prices of all real estate sales carried out in a public document. On the website of the electronic headquarters of the cadastre you can consult these values and know what elements have been used in the individual determination of the reference value. These values cannot exceed the market value because a series of minority factors are considered. These reduction factors are coefficients that are applied individually to the properties to ensure that they do not exceed the market value.
What if there is no reference value for a property?
It may happen that there is no reference value for a certain real estate or that this value cannot be certified by the General Directorate of the Cadastre. In these cases, if the value must be declared for the Inheritance and Donation Tax, the tax base will be the greater of the following magnitudes: the declared value or the market value. Market value is considered the most probable price for which an asset could be sold, free of charges, between independent parties.
What happens if you declare a lower value in the Inheritance Tax?
In the event that you inherit a property and declare a value lower than the reference value in the Inheritance and Donation Tax, the Tax Agency can verify the value of the property and claim the difference. Against the complementary settlement proposal made by the Tax Agency, the taxpayer may present the allegations and evidence that it deems appropriate.
What options does an heir have if the taxes to pay are high?
The year 2021 closed with a record number in the number of inheritances processed by Spaniards and in the number of inheritance renouncements. The number of people who renounced inheritance reached 55,574, which was 25% more than in 2020.
In 2022 the figures seem to be similar, due to the debts of the deceased and the taxes that the heirs must pay. Data for the first half of 2022 show that between January and June, 177,200 inheritances were processed, with some 27,200 heirs rejecting their part of the inheritance.
But what options does an heir have to pay the taxes derived from the inheritance?
– Apply the bonuses regulated by each autonomous community. The Inheritance Tax is a tax transferred to the autonomous communities that have established bonuses that allow, in some cases, to reduce the amount payable by 99%.
– Request a deferred payment. The initial payment period for the Inheritance Tax is six months, but it is possible to request an extension of the period for six more months, so that a whole year is achieved.
– Study the possibility of making donations during life. In this case, inheritance assets are distributed before the person’s death. However, it is necessary to carry out an exhaustive tax study by an inheritance tax expert to determine which option allows you to save more taxes: donating assets while you are alive or leave them as an inheritance.
– Pay with the deceased’s money. The Bank of Spain establishes that in order to use funds from a deceased person’s account and pay the Inheritance Tax, the banking entity must be requested to issue, charged to the deceased’s assets, a check in the name of the Tax Agency to pay the corresponding tax.
In the event that the debts derived from the inheritance are very high or the amount to be paid for taxes is excessive, the heirs have two options: accept the inheritance for the benefit of inventory or renounce the inheritance.
In short, knowing how to value a property for an inheritance will determine the possibility of calculating the taxes to be paid and will help make a decision about accepting or renouncing the inheritance and carrying out tax planning based on the purpose that you want to give to the property. property (short-term sale, own use for one of the heirs, etc.). In any case, the advice of experts, lawyers, consultants and tax experts is essential to make the appropriate decisions.
How and when to change
the writings after death
