Revisions of ratable value

PAY THE RIGHT TAXES? REVISION OF RATABLE VALUE ON PROPERTIES; A MUST.

What is the ratable value (“Valor Catastral”) of a property?

The ratable value of a property for each year is shown on your local rate receipt (Impuesto sobre Bienes Inmuebles). This value is established by adding the value of the land and that of the construction of the property as per the information given to the tax office by the original developer and will depend on numerous elements, such as location, surface, construction specifications, year of the building, type of construction, use of same, etc. It should never exceed the market value of the property but in principle should be in the region of half of this.

The State Budget states the general annual increase of these values for all properties in Spain. As the increase is by law, no individual notifications are sent out to the owners. For 2010-2013 due to the economic circumstances, it was approved not to increase the values and from 2013 to 2014 some values may vary depending on the year the last tax revision in each town took place. However, in this period the rateable value of your property may have increased considerably if there has been a tax revision in your town.

Revision of the ratable value.

In order to avoid a considerable difference between market value and ratable value of properties in a certain town revision of the ratable value will take place which will affect all properties from such town. In principle this should happen normally about 10 years after the former value was established or when a new Town Plan becomes into force in the municipality.

In this case the tax office remits by recorded delivery service to all owners of the new rateable value and you have one month to file a complaint before the Tax Office or the Economical-administrative Court of the regional government.

Some property owners naively think they can protest at the town hall when it comes to pay their taxes, i.e. normally when the local rates come due. Nothing could be farther from the truth. This tax is regulated by the national government and the only way to contest new property values is at the tax office or Economical Court and within one month of receiving notification. Other property owners will ask for a reduction of local property tax rates – and this might help – but will only serve for this tax.

What should you do when you receive a notification of a new ratable value?

You should check that the data used to calculate the ratable vale are correct. However, normally notifications are difficult to understand with technical references, coefficients and data which require specialized legal expertise to understand. Owners should contact experienced professionals who can revise property values for a fee that will prove to be very small compared to the money an owner can save by detecting errors.

There can be mistake in the size of a plot, properties or common areas are included that do not actually belong to the owner, wrong application of coefficients etc. Another important error involves overvaluing a property giving a value of more than 50% to the market value in town where the ratable value of the property is limited to no more than 50% of the market value. This last type of error could affect a large number of property owners due to the way the current financial crisis is affecting property values. All of these are good reasons to file a complaint in order to correct the value fixed by the authorities.

Why is it important that the value is correctly established?

The ratable value is used to calculate a number of taxes such as the Rates (IBI), the Income Tax relating to the ownership of real estate property not used for commercial or professional purposes but as a home, the Non Resident Income Tax, the Plusvalia Tax.

In addition to this the ratable value will be valid until a new revision of the values take place which normally occurs upon the elapse of 10 years or more. Therefore, any mistake made when calculating the value which you do not appeal will entail an unjustified increase of the amounts to be paid for taxes for a term of at least 10 YEAR, thus this makes it crucial to check the value.

Do you think the ratable value of your property is too high although there has been no tax revision?

In any case if you consider that the value of your property shown in your local rate receipt is too high, at any time you can check that the data in the tax office are correct and coincide with the physical reality of the property, in this case the use of expert advice is always advisable. You can request at any time the rectification of material mistakes made when establishing the value of the property.

Conclusion

If there is a revision of your ratable value or you simply believe that this is much too high professional advice should be sought to go over every fact and figure. Maybe they will find that everything is in order or on the contrary it will not. If there is an error, you can get it fixed and save yourself money in the future. If everything is all right, at least your conscience will rest in peace knowing you did everything you could to ensure you are not going to pay more tax than you really should.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution.