In the real estate sector, we work daily with several types of property values — and each serves a very different purpose. Understanding the difference between market value, cadastral value, and now the new market reference value is essential to avoid tax surprises when buying or selling property in Spain.
Market Value vs. Cadastral Value
The market value of a property depends entirely on supply and demand. In places like the Balearic Islands, current demand has pushed market prices significantly higher — something clearly reflected in property listings across Mallorca, Ibiza, and Menorca.
The cadastral value, however, is an administrative figure set by the Land Registry (Catastro). It has no direct relation to the real market price and is mainly used as a reference to calculate various taxes such as:
- IBI (Property Tax)
- Plusvalía (Tax on the Increase in Urban Land Value)
- IRPF (Income Tax)
- IRNR (Non-Resident Income Tax)
This cadastral value — together with other data — is also used by the Spanish Tax Office to estimate property values when calculating:
- Transfer Tax and Stamp Duty (ITP & AJD)
- Inheritance and Gift Tax (ISD)
If the declared value in a transaction is below the value estimated by the Tax Office, the buyer or seller may later receive a tax reassessment requiring payment of the difference, plus interest and potential penalties.
Introduction of the New “Market Reference Value”
Recent discussions in the Spanish Budget project suggested that the government planned to align cadastral values with market values, which would have caused a significant increase in IBI and plusvalía taxes.
However, the Ministry of Finance has officially clarified that this is not the case. The cadastral value will remain unchanged, and the government instead plans to introduce a new “real estate market reference value”.
According to the Ministry, this value aims to:
- Improve legal certainty and transparency in the real estate market.
- Combat tax fraud in property transactions.
- Serve as a uniform benchmark for valuation, ensuring fairer tax assessments.
This new market reference value will be:
- Calculated by the Land Registry (Catastro) based on real sale prices communicated by notaries.
- Verified through other official data sources.
- Accessible to public administrations and citizens as a transparent reference index.
What Does It Mean for Property Owners?
At this stage, the new market reference value remains a legislative project. Once the Budget Law is approved and this new system comes into force, its impact on taxation and property transactions will become clearer.
For now, property owners can rest assured that their IBI and plusvalía taxes will not increase automatically, as these depend solely on municipal regulation.
At Frau Legal, we will closely monitor the implementation of this new valuation system and its practical effects on property sales, inheritance, and tax obligations in the Balearic Islands.
👉 If you’re planning to buy, sell, or inherit property in Mallorca or Ibiza, contact our real estate law team. We’ll help you understand how these new measures could affect your transaction and ensure your interests are fully protected.
