2 September 2015 – El Confidencial
The Law protects. It is stated that each year, sheltered from/by the State Budget, it is possible to update the coefficients applied for establishing rateable value of the property. And although the electoral calendar is pressing, with only three months left for the general election, and this measure is not among the most popular because it can result in increased taxes, such as the Property Tax (Impuesto de Bienes Inmuebles, IBI), the Budget for 2016 does not preclude this measure.
“For 2016 the application of adjustment coefficients is expected to increase the rateable value in 1,567 municipalities, comprising 7,021,827 properties, and to reduce it in 126 municipalities, comprising 1,085,053 properties, representing an improvement in the approximation of the assessed values to market values in a total of 1,693 municipalities with 8,106,880 properties, “says the Cadastral Management Program developed by the Ministry of Finance.
As stated in the program, this revision addresses “the need for the Administration to have, through the Real Estate Cadastre managed by the General Directorate of Cadastre, a database constantly updated, in relation both to the basic characteristics of the real estate, and to its value”. That is, the aim is to rectify valuations that have become obsolete.
As stated in the program, this review responds to “the need for the Administration to have a constantly updated database”
“Otherwise,” is added in the program, “it will impair tax purposes which for the community have tributes”, such as the Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas, IRPF), the Transfer Tax/Tax on Patrimonial Transmissions (Impuesto de Transmisiones Patrimoniales, ITP), the Inheritance and Gift Tax and local taxes, such as the Real Estate Tax (Impuesto sobre Bienes Inmuebles, IBI), and the Tax on the Increase of Urban Land Value (Incremento del Valor de los Terrenos, IVT). The higher the rateable value, the more of taxable base and taxes, paid by taxpayers and collected by the Public Administrations..
Clues for the City councils
Updating the land registry is a particularly sensitive issue for the municipalities, who actually formulate request to the Treasury to revise the rates. “This measure is also an important outreach to municipalities and other local entities with the possibility of application of these rates, in order for municipalities to request application of the rates established in the General State Budget Act, as well as those in the successive years”, states the program. If it refers to the application as a possibility, it is because precisely municipalities ultimately decide if the new ratios are put to practice.
In any case, the document does not conceal that the update of cadastres provides a key information for the tax management of local government. “Municipalities need to know in advance the expected results, in both cadastral values,as well as in gross tax bases and net tax bases, so as to approve by tax regulation the adjusted rate of taxation and estimate the fees to be collected. Therefore, municipalities need cadastral data to define and set up their taxation policy regarding the Property tax,” it states.
The revision of rates forms part of the provisions of Article 32.2 of the Real Estate Cadastre Law, which states that “the general budget laws may update cadastral values of urban properties in the same municipality by application of rates based on the year of entry into force of the corresponding property value report of the municipality “. Based on these reviews, the municipalities will request the application of these ratios if three conditions are met. The first, “that at least five years have passed after the entry into force of the cadastral values derived from previous collective evaluation procedure of general nature”. Second, there should be “substantial differences” between market values and those taken in turn in cadastral values. And the third, the request to the General Directorate of Land Registry (Dirección General del Catastro, DGC) should be disclosed before May 31 of the previous year.
Continues the fight against fraud
But updating assessed values is not the only mission of the DGC in 2016. It will continue with the special Plan of the cadastral regularization procedure from 2013 to 2016, that is, with its crusade to “fight against fraud” cadastral adopted in late 2012 together with other tax measures aimed at the consolidation of public finances.
Specifically, based on technical work done by the DGC, it intended to prevent that the new constructions, expansions of existing ones, renovations or alterations of buildings remained off the radar of land registry. Or what is the same, it seeks to curb “the breach of duty to state correctly and in full by the obligation to do so” with the “ultimate aim to ensure consistency between the cadastral description and the real estate reality”. Let the land registry be a real property map of the present, not of the past.
With this aim, it entrusted to the State Company of Real Estate Asset Management (Segipsa) administration of the work of this cadastral regularization, a task that has a total cost of 124 million euros, to be distributed in four years, as it covers the period of 2014-2017.
Original story: El Confidencial
Translation: Lee La