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Car rental fleet at Malaga airport.
Car rental fleet at Malaga airport. / Ñito Salas

Road tax can cost double depending on the municipality where a vehicle is registered

  • Only 31 villages charge the minimum rate, while Malaga, Alhaurín de la Torre and Ronda are closer to the maximum and charge on average 70 euros more

How is it possible for a small village with barely 513 inhabitants, like Macharaviaya, to be the 'home' of 5,000 vehicles? And how has the number in Montejaque multiplied fivefold in recent years to 16,000, when only 1,000 people live there?

The answer is simple. It is all to do with the rate of vehicle tax (IVTM) charged by each council. Businesses with large fleets of vehicles, such as transport and car hire companies, can make considerable savings by registering them in these villages even though their wheels may never touch the tarmac of the muncipality’s streets.

It is completely legal, and it makes sense when the amount of tax which has to be paid could be twice as much elsewhere.

In practice, the rate for a medium-priced vehicle could vary by as much as 71.94 euros a year. Why is there so much difference? Because the law regulating local taxes gives town halls a certain extent of flexibility when it comes to the rates they charge.

There are minimum rates which, in the case of the most common vehicle model categories - up to 11.99 CV and between 12 and 15.99 CV - range from 34.08 to 71.94 euros respectively. After that, the councils have a free rein to increase the tax rate by up to twice as much (to 68.16 and 143.88 euros). In Malaga province, only 31 of the 103 municipalities apply the minimum rate, and they are all small villages.

The majority of larger places take advantage of the flexibility and charge the maximum. The only exceptions among those with the largest populations and highest number of registered vehicles are Torremolinos (37.08 and 79.93) and Estepona (37.7 and 79.5). This is considerably less than the 65.8 to 138.9 euros a year that have to be paid for the same car in Malaga city.

On a similar level are Ronda (59.64 and 139.56), Alhaurín de la Torre (64.58 and 136.33), Nerja (58 and 130.9), Benalmádena (61.34 and 129.49), Fuengirola (60.32 and 127.34) and Antequera (53.1 and 127.25). A step below are Marbella (51.4 and 116.25), Vélez (53.57 and 113.09) and Mijas (51.12 and 107.93), according to figures from the provincial tax collection office, which manages the tax payments of 96 councils and the bylaws of the remainder: (Malaga, Fuengirola, Benalmádena, Mijas, Vélez, Alhaurín el Grande and Macharaviaya).

Income from vehicle tax

This disparity in tax rates leads to situations such as the amount of money raised in Alhaurín de la Torre and Estepona being similar (2.5 and 2.6 million euros), even though 21,000 more vehicles are registered in Estepona (51, 679 compared with 30,771).

Cortes de la Frontera is also interesting, as it is the only municipality to charge the maximum rate for IVTM (68.14 and 143.88 euros). This is because it had to approve the increase in 2017 in order to access a government liquidity fund to reduce its debt.

These differences affect residents and, to a lesser extent, people who have moved elsewhere but whose vehicle documention still shows the old address.

However, some of the main beneficiaries are businesses with large fleets of vehicles, which find an easy way to reduce costs by registering them in a cheaper place. They only need a building in the village which can serve as their registered address.

This way, everyone wins. The companies make a considerable saving and the town halls receive a sizeable cash injection which helps them to maintain their services.

“In a village with little income, it helps a great deal to have a hire car company register its vehicles here,” says the mayor of Macharaviaya, Antonio Campos, who also explains that, thanks to this extra money, “We have been able to freeze our other taxes, charges and other prices for years.”

In this village in La Axarquía the IVTM is between 43.01 and 90.79 euros for the most common types of car.

In the case of Montejaque, which charges the legal minimum, these 16,000 payments bring in 436,000 euros, which amounts to practically one quarter of the annual budget.