A Simple Explanation of 'Valor de Compra' vs. 'Valor de Autoavalúo' in Arequipa Real Estate

As a licensed Peruvian real estate broker specializing in Arequipa, I frequently guide foreign investors through the intricacies of our local property market. One fundamental area of confusion often arises when discussing property values: the distinction between "valor de compra" (purchase value) and "valor de autoavalúo" (self-appraised value). Understanding these two terms is not merely academic; it is crucial for accurate financial planning, tax compliance, and robust due diligence when investing in Arequipa's vibrant real estate.

Let's demystify these concepts with a focus on practical application.

1. Understanding 'Valor de Compra' (Purchase Value)

The 'valor de compra' is, quite simply, the actual price that a buyer and seller mutually agree upon for a property transaction. It represents the fair market value at the time of sale, negotiated between willing parties.

Key Characteristics & Importance:

Market-Driven: This value is determined by supply and demand, property condition, location, recent sales of comparable properties, and the negotiation skills of the parties involved. In Arequipa, particularly in desirable areas like Yanahuara, Cayma, or the historic center, this value can fluctuate significantly based on market trends and unique property attributes.
Contractual Basis: The 'valor de compra' is the figure explicitly stated in the Minuta de Compra-Venta (preliminary sales agreement) and subsequently in the Escritura Pública (Public Deed of Sale) signed before a Peruvian Notary Public.
Basis for Capital Gains Tax (Impuesto a la Renta): For individuals, if a property acquired on or after January 1, 2004, is sold for a 'valor de venta' higher than its 'valor de compra' (adjusted for inflation and certain improvements), the difference (the net gain) is typically subject to a 5% capital gains tax. Properties acquired before January 1, 2004, by individuals are generally exempt from this tax.
Loan & Investment Basis: Financial institutions use the 'valor de compra' (often alongside a professional appraisal) to determine loan-to-value ratios for mortgages. For investors, this is the core figure used for calculating Return on Investment (ROI) and overall portfolio valuation.
S.U.N.A.R.P. Registration: This is the value that is officially registered with S.U.N.A.R.P. (Superintendencia Nacional de los Registros Públicos) in Arequipa, making it part of the public record of ownership and transfer.

Practical Advice for Foreign Investors:

Ensure the 'valor de compra' accurately reflects the agreed-upon price. Any attempt to under-declare this value to save on taxes is illegal and can lead to severe penalties, future tax complications, and difficulties when selling the property later. Always insist on transparency and accuracy in your purchase deed.

2. Understanding 'Valor de Autoavalúo' (Self-Appraised Value / Municipal Tax Value)

The 'valor de autoavalúo' is an administrative value assigned to a property by the local municipality (e.g., Municipalidad Provincial de Arequipa, or the specific district municipality like Yanahuara, Cayma, Miraflores, or Cerro Colorado). This value's primary purpose is to serve as the basis for calculating municipal property taxes, specifically the Impuesto Predial (Property Tax) and Arbitrios Municipales (municipal service fees like garbage collection, street cleaning, park maintenance, etc.).

Key Characteristics & Importance:

Administrative, Not Market-Driven: Unlike 'valor de compra,' the 'autoavalúo' is not determined by market forces or negotiation. It is calculated based on standardized tables, depreciation rates, construction materials, age, and location coefficients established by the Ministry of Economy and Finance (MEF) and applied by each municipality. It is a formulaic valuation.
Often Lower than Market Value: In most cases, the 'valor de autoavalúo' is significantly lower than the actual market value ('valor de compra'). This is a common characteristic of property tax systems globally and in Peru.
Annual Declaration: Property owners are required to "self-appraise" their properties annually and declare this value to the municipality (hence "autoavalúo"). The municipality then reviews and confirms this, issuing documents like the Hoja Resumen (HR) and Predio Urbano (PU) which detail the property's characteristics and its autoavalúo.
Basis for Municipal Taxes:
- Impuesto Predial: Calculated annually as a percentage (typically between 0.2% and 1%) of the 'valor de autoavalúo,' depending on the property's value bracket.
- Arbitrios Municipales: Also linked to the 'valor de autoavalúo' or specific property characteristics, varying by district.
Alcabalas (Real Estate Transfer Tax) Threshold: The taxable base for Alcabalas (3% of the purchase price exceeding 10 UIT) is legally defined as the transfer value, which cannot be lower than the 'valor de autoavalúo' for that year. Therefore, for tax calculation purposes, the notary will use the higher of the 'valor de compra' or the 'valor de autoavalúo'.

Practical Advice for Foreign Investors:

Always request the seller's most recent HR and PU documents from the municipality. Verify that the 'valor de autoavalúo' is up-to-date and that all Impuesto Predial and Arbitrios are paid. Unpaid municipal taxes become the responsibility of the new owner and can accumulate significant interest and fines.

3. The Crucial Differences & Why They Matter to Investors

Feature	Valor de Compra (Purchase Value)	Valor de Autoavalúo (Self-Appraised Value)
Purpose	Represents actual transaction price; basis for capital gains.	Basis for municipal property taxes (Impuesto Predial, Arbitrios).
Determination	Market negotiation between buyer/seller.	Administrative formula by municipality; not market-driven.
Reflects Market?	Yes, ideally.	No, usually significantly lower than market value.
Legal Document	Escritura Pública (Public Deed).	Hoja Resumen (HR) and Predio Urbano (PU) from municipality.
Tax Implications	Basis for Capital Gains Tax (5% for individuals), Alcabalas (3% above 10 UIT).	Basis for Impuesto Predial (0.2-1%), Arbitrios Municipales.
Registration	Registered with S.U.N.A.R.P.	Declared annually to the municipality.

For a foreign investor in Arequipa, understanding this duality is critical for:

Accurate Budgeting: You need to know the 'valor de compra' for your initial investment and future potential capital gains tax liability. You also need to know the 'valor de autoavalúo' to calculate your recurring annual property tax burden.
Due Diligence: A discrepancy between a very low 'autoavalúo' and a very high 'compra' is normal. However, if the 'autoavalúo' is surprisingly high (closer to market value), it might indicate an anomaly, or that the municipality has recently updated its tables. Conversely, a property with a suspiciously low 'autoavalúo' that hasn't been updated in years could suggest the seller has not fulfilled their municipal tax obligations, as annual declarations and payments are mandatory.
Negotiation Strategy: While you pay based on 'valor de compra,' knowing the 'autoavalúo' allows you to project your ongoing tax expenses, which can be a factor in your final offer.

4. Due Diligence Steps for Foreign Investors in Arequipa

To ensure you navigate these values correctly, follow these essential steps:

Step 1: Obtain HR/PU Documents: Request the latest Hoja Resumen (HR) and Predio Urbano (PU) from the seller, or directly from the Municipalidad Provincial de Arequipa (or the relevant district municipality). These documents explicitly state the 'valor de autoavalúo' for the current year.
Step 2: Verify Tax Payments: Use the HR/PU to confirm that all Impuesto Predial and Arbitrios Municipales have been paid up to the current month/quarter. Your notary will require proof of payment ("Constancia de No Adeudo") from the municipality before finalizing the sale.
Step 3: Professional Valuation (Recommended): While not legally required for every transaction, commissioning an independent property appraisal helps you understand the true market value of the property in Arequipa. This gives you a strong basis for negotiating the 'valor de compra' and ensures you are making a sound investment decision, especially for unique properties in areas like the Historic Center.
Step 4: Notary's Role: Your chosen Peruvian Notary Public will be instrumental. They are legally obligated to ensure that both the 'valor de compra' (in the Escritura Pública) and the 'valor de autoavalúo' (from the municipal documents) are accurately declared, and that all associated taxes (Alcabalas, Impuesto Predial) are paid or accounted for prior to registration with S.U.N.A.R.P. Arequipa.
Step 5: S.U.N.A.R.P. Registration: Once the Public Deed is signed, the notary will submit it to S.U.N.A.R.P. Arequipa for registration. This legally transfers ownership, recording the 'valor de compra' as the official transaction price.

5. Local Context/Warning: Arequipa Specifics

Arequipa, with its unique architectural heritage and distinct districts, adds further layers to this understanding:

Historic Properties (Centro Histórico): Properties within Arequipa's UNESCO World Heritage Historic Center often have 'valor de autoavalúo' figures that barely reflect their immense market value, restoration costs, or cultural significance. Always rely on thorough market appraisals for 'valor de compra' in these areas. Additionally, purchasing properties in the Historic Center may involve specific regulations from the Ministry of Culture regarding renovations and conservation.
Variations by Municipality: While the general rules for autoavalúo are national, the application and specific tables can vary slightly between district municipalities within Arequipa (e.g., Cayma, Yanahuara, Miraflores, Cercado, Socabaya, Jose Luis Bustamante y Rivero). This underscores the need for local expertise.
Risk of Under-Declaration: Some sellers (or less scrupulous buyers) might suggest declaring a 'valor de compra' lower than the actual price to reduce Alcabalas or capital gains tax. I strongly advise against this practice. Peruvian tax authorities are increasingly sophisticated in detecting discrepancies, and the penalties for tax evasion are severe. Moreover, it can complicate future sales and loan applications for you, as the declared low value would become your new 'valor de compra' for future capital gains calculations. Always declare the true 'valor de compra'.

Understanding the difference between 'valor de compra' and 'valor de autoavalúo' is more than just navigating bureaucracy; it's about protecting your investment, ensuring legal compliance, and making informed financial decisions in Arequipa's dynamic real estate market.

⚠️ Legal Notice: Consult a Local Lawyer. The information provided in this article is for general guidance only and does not constitute legal advice. Real estate laws in Peru are complex and can change. Foreign investors are strongly advised to consult with a qualified, independent Peruvian real estate lawyer and a tax advisor before making any property investment decisions in Arequipa.

For personalized advice and to explore prime investment opportunities in Arequipa, visit us at ArequipaRealEstate.com.