When you receive notification of an inheritance, one of your first concerns—beyond the inevitable emotional moment—revolves around a practical and complex question: how much is what you are about to inherit really worth? This issue is not merely informative. The value assigned to the inherited assets will directly determine how much you pay in taxes, how the inheritance will be distributed equitably among co-heirs, and, ultimately, whether that family legacy represents an opportunity or a financial burden.
The valuation of inherited assets in Spain has undergone significant regulatory changes in recent years, especially since the enactment of Law 11/2021 on measures to prevent and combat tax fraud, which introduced the concept of the cadastral reference value as the minimum taxable base for Inheritance and Gift Tax. By 2025, these criteria are consolidated and present new technical challenges for both heirs and professionals in the legal and tax sectors.
Why is it so important to correctly value an inheritance?
Imagine this scenario: your father has passed away and left you an apartment in central Madrid, shares in the family business, and some household effects. As an heir, you need to settle the Inheritance and Gift Tax within six months of death. The tax authority will require you to declare the real value of these assets on the date of death, and if that value is lower than what the Tax Office considers correct, you may face a valuation review, with the resulting penalties and late-payment interest.
But it’s not just a tax issue. If several heirs must divide up these assets, the inevitable question arises: at what date do we value the assets to ensure a fair distribution? At the time of death or at the date of partition, which may occur years later? The Supreme Court’s case law has established clear criteria that every heir should know.
Valuation on the date of death: the general principle of the Inheritance Tax
The moment of accrual as a starting point
Article 24 of Law 29/1987 on Inheritance and Gift Tax unequivocally establishes that “the tax shall be accrued on the date of the decedent’s death.” This means that, for tax purposes, the value of the assets must be determined by reference to that precise moment, not when the inheritance is formally accepted, nor when the partition among heirs is made.
This principle has a clear legal logic: Article 657 of the Civil Code determines that “the rights to a person’s succession are transmitted from the moment of their death.” Although heirs may not formally accept the inheritance until months or even years later, legally they are already holders of those rights from the very instant of death.
The Supreme Court has reiterated this doctrine in multiple judgments. For example, the Judgment of July 13, 2012 (Appeal 110/2009) expressly states: “The valuation of inherited assets must refer to the date of the decedent’s death, as it is at that moment when the mortis causa transmission occurs and the heirs’ right is born.”
What happens if the value of assets changes between death and acceptance?
A frequent situation in practice: the decedent dies in January 2024, when their residence has a market value of €300,000, but the heirs do not settle the tax until November 2024, at which time that same property is worth €350,000 due to an increase in the real estate market.
The regulations are clear: the valuation must be made at the date of death (January 2024), not at the tax settlement date. This protects the taxpayer from subsequent market fluctuations, but also means that one cannot benefit from possible devaluations occurring after death.
The cadastral reference value: the major innovation since 2022
What is the reference value and why is it so relevant?
Since January 1, 2022, following Law 11/2021 on measures to prevent and combat tax fraud, the cadastral reference value has become the minimum taxable base for the Inheritance and Gift Tax when real estate is inherited.
This value is determined by the Directorate-General for Cadastre based on actual purchase prices registered before notaries, the cadastral characteristics of each property, and market studies for each geographic area. Crucially, the reference value cannot exceed the market value of the property, as reduction factors are applied in its calculation.
You can consult the reference value of any property free of charge on the Cadastre Electronic Headquarters (www.sedecatastro.gob.es), by entering the cadastral reference or using your digital certificate.
Fundamental differences: cadastral value vs. reference value
It is essential not to confuse the cadastral value (which is still used to calculate IBI and other local taxes) with the cadastral reference value (which is used as the minimum base for the Inheritance Tax).
The cadastral value is usually significantly lower than the market value—typically between 30% and 60% less—while the reference value aims to approximate the property’s real value. This difference can mean a substantial increase in the amount of tax to be paid.
What happens if the declared value is less than the reference value?
Here lies one of the most important changes of the 2022 reform. If you declare a property below the cadastral reference value, the Tax Office will automatically take the latter as the taxable base for the tax, without having to initiate any value review procedure.
For example: you inherit a house and believe its market value is €200,000, but the cadastral reference value is €250,000. Even if you declare €200,000, the Tax Office will settle the tax taking €250,000 as the base.
You may only declare a value lower than the reference value if the real value of the property you declare is greater than the reference value, in which case you must declare this higher real value.
Valuation of real estate: current methods and procedures
Technical methods of property valuation
When a professional valuation of an inherited property is required, experts mainly use three methods recognized by Order ECO/805/2003, which regulates real estate valuation standards in Spain:
Comparison method: This is the most commonly used in practice. It consists of comparing the property with similar ones that have recently been sold in the same area. The regulations require a minimum of 6 comparable samples or “witnesses” to ensure reliability. This method is especially suitable for homes in urban areas with a representative market.
Capitalization of income method: Primarily applies to properties that generate income, like commercial premises or rented homes. Calculates value by capitalizing 20% of the average profits of the three previous fiscal years.
Replacement cost method: Useful for unique or new-build properties, calculates how much it would cost to rebuild the property in current conditions, deducting depreciation due to age and conservation status.
The official appraisal: when is it necessary?
Although heirs can freely agree on the value of assets for distribution among themselves, for settling the Inheritance Tax it is advisable to have an official appraisal carried out by a company approved by the Bank of Spain or by a certified expert appraiser.
The main approved appraisal companies in Spain include Tinsa, Gesvalt, Arquitasa, Tecnitasa, Sotasa, and CBRE Valuation, among the 32 authorized entities currently. These companies apply the technical criteria of Order ECO/805/2003, and their reports are fully valid before the tax authorities.
The cost of an official appraisal for a standard home usually ranges between €150 and €300, depending on the property’s characteristics and the chosen appraisal company.
Valuation of family businesses in inheritances
A technical and emotional challenge
The transfer of a family business by inheritance is one of the most complex valuation situations. It’s not just about quantifying accounting assets and liabilities, but about determining the real value of an operating business, considering intangible elements like client portfolio, know-how, brand, and future profit expectations.
Applicable valuation methods
For companies that are not listed on the stock market—the vast majority of Spanish family businesses—the Inheritance Tax Law refers to Article 16 of the Wealth Tax Law, which sets out three alternative criteria:
- The theoretical value from the last audited balance sheet: If the company submits audited accounts with a favorable report, this theoretical balance value will be taken.
If there is no favorable audit, the highest of the following three values must be considered:
- The nominal value of the shares
- The theoretical value from the last approved balance sheet
- The value resulting from capitalizing at 20% the average profit from the past three years
This methodology can result in very disparate valuations, especially in businesses with high recurring profits, where the capitalization method can yield values far above accounting value.
The 95% tax reduction for family businesses
One of the most relevant tax benefits in Spain is the 95% reduction in the taxable base of the Inheritance Tax when shares in family businesses that meet certain requirements are inherited.
Fundamental requirements to apply this reduction in 2025:
- Real economic activity: The company must carry out a business or professional activity, not merely manage real estate or financial assets (except if real estate rental is carried out with at least one full-time employee).
- Paid managerial functions of the decedent: The deceased must have performed management duties in the company and received remuneration that represented more than 50% of their total work and business earnings.
- Maintenance of acquisition: Heirs must maintain the holding for 10 years from death and not carry out actions that substantially reduce the inherited value.
The Supreme Court has recently clarified (Judgments 956/2025 and 969/2025 of July 2025) that for real estate rental companies, it is sufficient to have one full-time employee, without the need to prove there is an effective workload justifying the hiring. This doctrine represents an important relief for family real estate holdings.
Domestic effects: a frequently forgotten element
What is considered domestic effects?
Domestic effects include all movable goods intended for the deceased’s personal and everyday use: furniture, appliances, clothing, housewares, crockery, bedding, ordinary decorative objects.
Jewelry, works of art, vehicles, boats, valuable collections, antiques, and cash or financial investments do not form part of domestic effects.
The 3% rule and its exceptions
Article 15 of the Inheritance Tax Law states that “domestic effects are part of the hereditary estate and will be valued at 3% of the deceased’s estate, unless those concerned assign a higher value or reliably prove their inexistence or a lower value.”
For years, the tax authority automatically applied this 3% to all estate assets, leading to absurd situations: for example, adding 3% as domestic effects when the estate consisted only of rural properties, bank money, or company shares.
Supreme Court doctrine: domestic effects must only be calculated over assets intended for domestic use
The Supreme Court, in Judgments 499/2020 of May 19 and 342/2020 of March 10, established a clarifying doctrine: the 3% should not be applied to all inherited assets, but only to those which, due to their identity, value, and function, can be used for the deceased’s personal or private use.
This means that if the inheritance consists of rural properties, commercial premises, bank accounts, and company shares, domestic effects should not be added, since none of these assets were for the deceased’s personal use.
This doctrine was confirmed in a recent Judgment of the Superior Court of Justice of Madrid in November 2024, where the Tax Office’s assessment that added 3% domestic effects over an estate made up exclusively of rural properties, cash, and securities was annulled.
Expert valuations and disputes with the Tax Office: the contradictory expert assessment
When the Tax Office considers that you have understated the value
Suppose you inherit a home and declare its estimated market value at €250,000 (higher than the reference value of €230,000). However, the Tax Office initiates a value review procedure and concludes the property is worth €320,000, issuing a supplementary assessment for the difference. What can you do? You have the right to request a contradictory expert assessment, a legal mechanism provided for in Articles 57 and 135 of the General Tax Law, allowing the taxpayer to challenge the administrative valuation via an independent expert report.
Procedure for contradictory expert assessment
Phase 1—Request: The taxpayer must request it within 10 working days from notification of the proposed assessment, committing to deposit in advance 5% of the value reviewed by the administration as a guarantee.
Phase 2—Taxpayer’s expert appraisal: The concerned party must submit an appraisal made by an independent expert (preferably a company approved by the Bank of Spain) technically justifying a different value than that reviewed by the Tax Office.
Phase 3—Third expert appointment: If the difference between both valuations exceeds 10% of the reviewed value, a third expert is appointed, usually a technician from the relevant Official Association (architects, engineers, etc.).
Phase 4—Final valuation: The third expert’s appraisal is binding and final, provided it doesn’t set a value lower than that initially declared by the taxpayer nor higher than that reviewed by the Tax Office.
Practical example of contradictory expert assessment
Situation: You inherit a home and declare it at €280,000. The Tax Office reviews it at €400,000. You request a contradictory expert assessment, and your expert values it at €300,000.
Calculation of need for a third expert:
- Difference between values: €400,000 – €300,000 = €100,000
- Percentage over reviewed value: €100,000 / €400,000 = 25%
- As it exceeds 10%, it is necessary to appoint a third expert
Possible scenarios after the third expert’s valuation:
If the third expert values the home at €350,000, that will be the final value (within the €280,000—€400,000 range). The costs for the third expert are distributed proportionally between the administration and the taxpayer, according to the proximity to each party’s value.
If valued at €270,000, the initially declared value (€280,000) will be taken, as the lower limit. The taxpayer must pay the third expert’s costs.
If valued at €450,000, the Tax Office’s reviewed value (€400,000) is taken, as the upper limit. The Tax Office must pay the costs.
Valuation for distribution among heirs: at what date?
The general rule: valuation at the moment of partition
While, for Inheritance Tax settlement, assets must be valued as of the date of death, for equitable distribution among heirs, the Supreme Court’s case law establishes that the valuation must be made at the time of partition.
The logic is clear: if death occurs in 2020 but the partition takes place in 2025, assets may have experienced significant changes in value (revaluation or depreciation). Valuing at the date of death for distribution could cause substantial injustice among co-heirs.
The Supreme Court’s Judgment 1145/2003 of December 4 clarifies that the ad valorem system should be applied, i.e., the current market value at the time of distribution.
Exceptions: when to value at date of death for distribution
Some situations exist in which, even for partition, assets should be valued as of the date of death:
- Specific item legacies: When the testator bequeaths a specific asset to a designated heir, that asset is valued as of the date of death, with its risk and benefit exclusively for the legatee.
- Donations computable to the legal share: Lifetime donations made by the decedent are valued as of the date of death to calculate if the legal share of forced heirs has been respected.
- Partitioning assignments by the testator: Where the decedent has made the partition in their will, allocating specific assets to each heir.
Frequently asked questions about valuation of inherited assets
What if I disagree with the cadastral reference value of an inherited property?
You may challenge the reference value by filing an administrative appeal before the Directorate-General for Cadastre within one month of notification, or directly a contentious-administrative appeal before the courts. You must provide a professional appraisal justifying that the reference value exceeds the real market value of the property.
Can inherited assets be valued at the cadastral value instead of the reference value?
No. The cadastral value (which appears on the IBI bill) is no longer valid as a taxable base for Inheritance Tax since January 2022. You must use at least the cadastral reference value, unless the real value is higher.
If we quickly sell an inherited property, does the sale price serve as the value for the tax?
Although the sale price may be indicative of real value, the Tax Office may consider that it does not reflect the value at the time of death if a significant period has passed or if there are circumstances justifying a different valuation (urgent sale, sale between family, improvements made). It is safest to obtain an official appraisal as of the date of death.
What happens if heirs cannot agree on asset values for distribution?
In case of disagreement, any heir may request judicial division of the inheritance before a court, which will appoint a judicial expert to value all assets in the estate. This valuation will be binding for all co-heirs.
Is it mandatory to inventory all assets in the inheritance?
Yes, to correctly settle the Inheritance Tax, it is essential to prepare a complete inventory of all assets, rights, debts, and charges of the decedent. This inventory must include: real estate, bank accounts, vehicles, company shares, domestic effects, life insurance, credit rights, etc. Debts pending, last illness and funeral expenses, and encumbrances on assets must also be deducted.