Spain's Catalonia region is headed for a new face-off with Madrid after Catalan President Carles Puigdemont declared that he will hold an independence referendum this year.

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In his televised New Year's speech, Puigdemont said that he will hold a "legal and binding" vote to allow the Catalans to freely decide for their future through a referendum. The vote is expected to take place in September, and the decision will be based on a resolution passed by the region's parliament where separatists are the majority.

However, Spanish Prime Minister Mariano Rajoy on Friday dashed any hopes of such a referendum.

"It is not possible to hold a referendum that will do away with national sovereignty and the equality of Spaniards," the Prime Minister said, adding that the referendum plans are not going anywhere.

Following an inconclusive general election in June last year, Rajoy and his conservative Popular Party recently won opposition support to rule as a minority government. His government has since sanctioned Catalan officials involved in holding the outlawed ballot in 2014.

The Prime Minister, on the other hand, has accused the officials fighting for secession of trying to "liquidate" the nation.

The region held a consultative ballot in 2004 and recorded a huge majority for independence, but the results were ignored by Spain. Separatists' sentiments in the region have morphed into mass movement in the past five years. This has promoted the growth of a distinct Catalan identity that dates to five centuries back.

TagsSpain, Catalonia, Catalan independence referendum