Town halls across the Costa del Sol and Malaga province are in limbo over 'plusvalía', the land-value tax they charge to property sellers, while they wait for a change in law to clarify how this tax can be levied in the future.
The uncertainty comes after last year's ruling by the Constitutional Court that town halls had been illegally charging the tax where real property prices had actually gone down and after a subsequent increase in court sentences against councils.
In the latest case to go against a Costa town hall, Benalmádena council has been ordered to pay back 121,801 euros to a Swiss national who was forced to overpay when they sold their property in the Torrequebada area in 2014.
The 'plusvalía' tax is levied directly by town halls on the supposed increase in value of land a property is built on since it last changed hands, and not on the sales value of the property itself. The levy has been at the centre of controversy as the legal formula used has often incorrectly overestimated a land value increase even if the owner is losing money on the sale of the property itself.
In the case of the decision against Benalmádena, which came after an appeal led by lawyers Maldonado González, the court said that the council had failed to check whether the value had really gone up and had relied on standard calculation methods that have now been ruled unconstitutional. It says that the homeseller's attempts to show with market studies why the tax was disproportionate had been ignored.
The body responsible for collecting municipal taxes on behalf of 79 of the 103 town halls in Malaga province says it currently has 6,000 requests for refunds from homeowners, developers and banks for money supposedly overpaid in the last four years combined with new property sales where councils have not charged the tax while the new rules are clarified. It says the total tax income on hold is 22 million euros.
Town halls are asking the government to urgently reform the 'plusvalía' tax and compensate them for the revenue they will be losing. They have proposed that either the charge be incorporated directly into income tax, taking it out of their hands, or a new charging scale linked to real property values. The new law is expected to come in the summer.