Can the tax authorities use a mortgage valuation to raise the tax value of a property?
The use by the tax authorities of the mortgage valuation incorporated into the deed in order to raise the tax value of a property has been the subject of intense debate in academic commentary and in the case law. The judgments of the Third Chamber of the “Tribunal Supremo”, Spain's Supreme Court, of 23 and 27 February 2026, in line with the Chamber's official case‑law report for the 2025–2026 two‑year period, confirm that, in cases where a “comprobación de valores” —a review of declared values— is available, the tax authorities may have recourse to the mortgage valuation figure where there is a material difference from the value declared, without any need to establish fraud or concealment beforehand. That valuation does not, however, become an irrebuttable presumption: the taxpayer may contest it by means of expert evidence and, where appropriate, through the “tasación pericial contradictoria”, the adversarial expert valuation provided for in the “Ley General Tributaria”, Spain's General Tax Act —the LGT—. This mechanism must be clearly distinguished from the cadastral reference value, which operates as a direct taxable base in the “Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados”, Spain's transfer tax and stamp duty, and in the “Impuesto sobre Sucesiones y Donaciones”, its inheritance and gift tax.
1.Means of valuation review and the mortgage valuation as a reference
The starting point lies in article 57 of Law 58/2003 of 17 December, the LGT, which lists the means of valuation review available to the tax authorities. They include, in addition to the capitalisation or attribution of income, estimation by reference to values appearing in official registers of a tax nature, average market prices, quotations on domestic and foreign markets, the opinion of the tax authorities' own experts, the value assigned to assets in insurance policies, the value assigned for the valuation of mortgaged properties in compliance with mortgage legislation, the price or value declared for other transfers of the same asset carried out within a given period, and any other means laid down in the legislation governing each particular tax. It is subparagraph g) of paragraph 1 that expressly authorises the use of the value assigned for the valuation of mortgaged properties.
Article 134 LGT governs how a valuation review is to be carried out. It allows the tax authorities to review values in accordance with the means set out in article 57, save where the taxpayer has filed a return using the values published by the authorities themselves in application of one of those means. It requires that, where the value determined by the authorities differs from the value declared, the taxpayer be notified of a duly reasoned proposed adjustment and valuation, stating the means and criteria used, and it provides that the taxpayer may not bring a separate appeal against the valuation, but may seek an adversarial expert valuation or raise any question relating to the valuation in the course of appeals against the adjustment itself.
In the field of taxes on transfers of wealth, the consolidated text of the “Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados”, the Transfer Tax and Stamp Duty Act —the TRLITPAJD—, approved by Royal Legislative Decree 1/1993, provides in its article 10 that the taxable base consists of the value of the asset transferred or of the right created or assigned, value meaning, as a general rule, market value, unless one of the specific rules applies. It adds that, if the value declared by the parties concerned, the price or agreed consideration, or both, exceed market value, the greater of those figures is to be taken as the taxable base. In the case of immovable property, paragraph 2 refers, as the taxable base, to the reference value provided for in the rules governing the “Catastro Inmobiliario”, Spain's Land Cadastre, as at the date on which the tax becomes chargeable, unless the value declared or the price is higher, in which case the greater of those figures is taken. Where there is no reference value or it cannot be certified, the taxable base will be the greater of the value declared, the price or consideration and market value, without prejudice to review by the tax authorities.
In inheritance and gift tax —the ISD—, Law 29/1987 of 18 December provides in its article 9 that the taxable base consists of the net value of each successor's individual acquisition, value meaning, as a general rule, market value, unless the value declared is higher, in which case the latter is taken. For immovable property, paragraph 3 likewise refers to the cadastral reference value, on the same logic of taking the greater of the reference value and the value declared. Article 18 of that same act expressly provides that the tax authorities may review the value of the assets and rights transferred by the means set out in article 57 LGT, save where, in the case of immovable property, the taxable base is its reference value or the value declared because the latter is higher, in accordance with article 9. In other words, where the taxable base is determined by the cadastral reference value, no valuation review is available; where there is no reference value or it cannot be certified, such a review is available, and the mortgage valuation may be one of the means used.
2.The Supreme Court's doctrine on the mortgage valuation
The Supreme Court judgments of 23 and 27 February 2026, Third Chamber, Second Section, form part of a line of case law which had already recognised the validity of the mortgage valuation as a means of valuation review, while qualifying its scope. The Chamber starts from the express authorisation in article 57.1 g) LGT and recalls that a mortgage valuation, carried out by valuation firms approved under the rules governing the mortgage market, aspires to objectivity and is based on technical valuation criteria. Where that valuation is incorporated into the mortgage loan deed and reflects a value significantly higher than the one declared in the deed of transfer, the tax authorities may use it as a reference for reviewing the value, without any need to establish fraud or concealment beforehand.
The Chamber rejects the argument that the use of a mortgage valuation requires prior proof that the taxpayer has concealed the true value or has simulated a lower price. Article 57 LGT does not make the use of the means of review conditional on the existence of fraud; they are ordinary tools of tax administration. A material difference between the value declared and the valuation figure may justify a review, provided that the tax authorities give adequate reasons for their choice of that means and explain why they consider that the valuation reflects market value.
At the same time, the Supreme Court insists that a mortgage valuation is neither an irrebuttable presumption, iuris et de iure, nor a binding and unchallengeable value. It is a means of review which the taxpayer may contest by evidence to the contrary. The Chamber recalls that article 106 LGT provides that expenses and transactions must be evidenced primarily by invoice and that, once the tax authorities call their actual performance or their value into question on reasoned grounds, it falls to the taxpayer to produce evidence as to their reality and amount. In the context of a valuation review, this means that the taxpayer may produce expert valuation reports, alternative valuations, market data and any other material showing that the mortgage valuation figure does not correspond to market value as at the date on which the tax becomes chargeable.
3.The difference between the mortgage valuation and the cadastral reference value
It is essential to distinguish the mortgage valuation from the cadastral reference value. The reference value, governed by the consolidated text of the “Ley del Catastro Inmobiliario”, the Land Cadastre Act, approved by Royal Legislative Decree 1/2004, and implemented by decisions of the “Dirección General del Catastro”, the Directorate‑General for the Cadastre, is conceived as an objective value determined on the basis of property transaction data and of cadastral valuation criteria, intended to serve as the taxable base for certain taxes. Article 10.2 TRLITPAJD and article 9.3 of the Inheritance and Gift Tax Act incorporate it as the direct taxable base for immovable property, with the possibility of challenging it by an application to rectify the self‑assessment or by a “recurso de reposición”, an application for review, following a binding report of the Cadastre confirming or correcting the value.
Where a cadastral reference value exists and can be certified, the taxable base for ITP and for ISD is determined by that value, unless the value declared or the price is higher, in which case the greater of those figures is taken. In such cases the tax authorities cannot resort to a valuation review by the means set out in article 57 LGT, because the legislature has opted for a system of direct determination of the taxable base. The mortgage valuation accordingly plays no part here as a means of review; it may be an item of evidence in a challenge to the reference value, but not a free‑standing means of review.
Where, by contrast, there is no reference value or it cannot be certified by the Cadastre, the taxable base is determined by the greater of the value declared, the price and market value, and the tax authorities may review market value by the means set out in article 57 LGT. It is in this context that the mortgage valuation acquires relevance as a means of review. The difference between the two instruments is therefore conceptual and functional: the reference value is an objective value fixed by the cadastral authorities with direct effects on the taxable base; the mortgage valuation is a private technical valuation which the tax authorities may use as a reference in a review, but which neither binds nor replaces the reference value.
4.How the taxpayer can contest the valuation: expert evidence and the adversarial expert valuation
The taxpayer has several avenues for contesting a valuation based on the mortgage valuation. First, at the tax management stage, the taxpayer may make submissions against the proposed adjustment and valuation notified by the tax authorities, producing expert valuation reports that call the mortgage valuation into question. Such reports may point out, for example, that the valuation was carried out for mortgage security purposes, applying prudential or safety criteria that do not correspond to actual market value, that unrepresentative comparables were used, that certain features of the property were overvalued, or that specific circumstances affecting its value were disregarded.
Secondly, the taxpayer may seek the adversarial expert valuation provided for in article 57.2 LGT and developed by regulation. The adversarial expert valuation is a specific procedure for confirming or correcting the valuations resulting from the application of the means of review set out in article 57. The taxpayer appoints an expert who values the asset; if the difference between the valuation of the taxpayer's expert and that of the tax authorities does not exceed a given percentage, the average is taken; if it does exceed it, a third expert is appointed, whose valuation may be binding. This procedure allows an independent technical check to be introduced and may correct excessive valuations based on mortgage valuations.
Thirdly, the taxpayer may challenge the tax assessment before the “tribunales económico‑administrativos”, Spain's specialised tax tribunals, and, where appropriate, before the administrative courts, alleging defects in the reasoning, in the choice of the means of review, in the application of the mortgage valuation or in the assessment of the evidence. The case law has insisted that the tax authorities must give adequate reasons for their choice of the means of review and for the resulting valuation, explaining why they consider that the valuation reflects market value and why they reject other material. A failure to give reasons, or the mechanical use of a mortgage valuation without critical analysis, may lead to the annulment of the assessment.
5.Risks and opportunities: legal certainty and the burden of proof
The SSTS of 23 and 27 February 2026 bring legal certainty by making clear that the tax authorities may use the mortgage valuation as a means of valuation review without having to establish fraud, but they also reinforce the idea that the taxpayer is not left defenceless. The valuation is a starting point, not a finishing point. The burden of proof shifts: the tax authorities must give reasons for their choice of means and for the valuation; the taxpayer must produce evidence to the contrary if they disagree.
From a practical perspective, the existence of a mortgage valuation significantly higher than the value declared counsels caution when fixing the value in the deed of transfer. Declaring a value far below the valuation figure may trigger a valuation review and a possible adjustment, with surcharges and interest. At the same time, the mortgage valuation may be a double‑edged sword: if the market has moved downwards or if the valuation was conservative, the taxpayer may show that market value as at the date on which the tax becomes chargeable is lower, using updated expert reports.
6.Conclusion: the mortgage valuation as a legitimate but not conclusive instrument
The consolidation of the case law in 2026 places the mortgage valuation in its proper position within the system of valuation review. It is a legitimate instrument, expressly authorised by article 57.1 g) LGT, which the tax authorities may use where there is a material difference from the value declared and there is no cadastral reference value directly determining the taxable base. It does not require fraud or concealment to be established beforehand, because the means of review are ordinary administrative tools, not disguised penalties.
The mortgage valuation is not, however, a conclusive value or an irrebuttable presumption. The taxpayer may and should contest it where it does not reflect market value, by means of expert evidence, the adversarial expert valuation and a challenge to the assessment. The difference from the cadastral reference value is clear: the latter operates as a direct taxable base and is challenged through specific channels, whereas the mortgage valuation is a means of review subject to technical and judicial scrutiny.
In a context in which the valuation of immovable property has significant effects on ITP, ISD and other taxes, the Third Chamber's doctrine for the 2025–2026 two‑year period, set out in its official case‑law report, helps to balance the positions of the tax authorities and taxpayers: it recognises the legitimacy of using the mortgage valuation, but reaffirms the centrality of market value and the possibility of contesting valuations on technical grounds.
