Landmark 'plusvalía' tax ruling could pave the way for further claims

View of Vélez-Málaga.
View of Vélez-Málaga. / JENNIE RHODES
  • A court has ordered Vélez-Málaga town hall to pay back almost 5,000 euros of increased land-value tax despite it being unclear if the vendor made a loss or not

A court in Malaga has ruled that Vélez-Málaga town hall must pay back 4,844 euros in Plusvalía (increased land-value tax) to a resident who sold a house in the Chilches area in March 2016.

The man originally bought the house in August 2005 and at the time of selling it the town hall gave the property a value of 59,805 euros, for which the seller was ordered to pay the aforementioned plusvalía tax.

Until last year anyone selling a property in Spain was required by national law to pay the tax, regardless of whether they had made a profit or loss on the sale as it is calculated on theoretical increased land value and not actual market prices. However, a ruling by Spain's Constitutional Court in 2017 deemed it unfair that vendors who had not made a profit on the sale of their property had to pay the tax.

In this landmark case, the first of its kind in Malaga province, the court did not look into whether the vendor had indeed made a loss or profit, suggesting that it no longer matters whether a profit is made or not. Although the vendor's lawyer, Francisco Galán Palmero, said that “the deeds proved that there had been losses”.

Similar rulings have already been given in Madrid, Catalonia, the Canary Islands and Navarra, but this is among the first in Malaga. The judge said after the ruling that her decision would pave the way for further claims against other town halls in the province.

The Plusvalía is a national tax applied at a local level by town halls. Since it was called into question by the Constitutional Court there have been further calls to reform it or even scrap it altogether. It currently only applies to urban land and not rural land and to the value of the land, not the construction itself.