Urban Planning Technical Services of the Orihuela Council are currently in the final phases of processing the updated tax ordinance that regulates the Tax on Construction, Installations, and Works (ICIO). The current tax is set to increase by 60%. This ordinance has been suspended since 2008, with a unit price per square metre of construction.
The reference module will increase from the current 500 euros per square metre of construction to 797 euros per square metre, irrespective of the form of housing, whether social or private, and for the entire municipal area.
It is imperative to pay the tax in order to obtain a significant construction permit. The City Council is of the opinion that it is incurring an annual loss of up to €4 million as a result of the price being suspended since 2008.
Economic motor
The primary economic driver of the municipality is the construction of tourist accommodation, which is directly impacted by this measure. In the province of Alicante, Orihuela has been the leader in the classification of new housing construction and the purchase and sale of new and second-hand housing, alongside Torrevieja, since the end of the housing crisis. Approximately one thousand new residences are constructed annually in Orihuela, particularly along its coast.
This reference price for free-market housing in Orihuela is established by the current tax ordinance at 500 euros per square metre of built area. Nevertheless, the Valencian Building Institute (IVE) presently establishes a construction module of 780 euros/m², which, according to the technical experts who draughted the new ordinance, signifies “the obsolescence” of the current price in the Orihuela ordinance.
Price increase
In this regard, they emphasise in the section that justifies the increase that the cost of cement, ceramic materials, wood, steel materials, aggregates and rocks, and energy has increased by approximately 35% from January 2012 to 2024. Consequently, it is evident and widely recognised that the construction cost module in effect in the tax ordinance is outdated and does not accurately reflect the reality of construction costs in the economic market.
The opposition groups have been provided with the text of the new ordinance by the governing team of the People’s Party (PP) and Vox (Vox). They are required to submit their objections within ten days. There is no timeframe for the new ordinance to be initially debated and approved in the August plenary session—which in Orihuela is traditionally held in early September—so it will be debated in the ordinary September session, at the end of that month.
2.8 million euros
The significance of construction activity in Orihuela, particularly in its coastal region, is evidenced by the fact that the City Council collected €2.8 million from this tax in 2024, despite the indirect tax rate being frozen for 18 years. It had projected nearly €8 million for 2025, which included the sale of numerous municipal plots for the construction of over 200 residences and the tax adjustment if it were implemented before July of this year, which will no longer be feasible.
Entrepreneurs who are promoting themselves will experience substantial advantages
At the beginning of 2024, in an ordinary plenary session, the local government’s intention to update the tax was announced by the local government team because, he stated, the municipality was losing around four million euros in revenue annually with the current calculation. In that session, he argued that the construction of new housing on the Orihuela coast costs 1,200 euros per square meter, 700 more than the current reference price, and denied that the modification is an increase; it is an “update to real market prices because we are losing out on collecting a lot of money for the benefit of the real estate developer, who makes a huge profit from their business activity .”
It is imperative to verify that a developer has paid the appropriate ICIO charge in order to obtain a major works permit. Without this requirement, or at least an advance payment, the project should not begin, as it would not meet all the permit requirements.
According to Ciudadanos, an ordinance that is “tax-intensive and deceitful” and has a significant impact on the economic engine of Orihuela.
José Aix, the spokesperson for Ciudadanos, emphasised that the municipal measure is entirely disproportionate for a strategic sector in Orihuela, specifically residential tourist accommodations and entrepreneurs.
“It is a revenue-raising ordinance that is deceitful in its justification, as it makes an assessment of potential revenue that is unsubstantiated and enables them to inflate the revenue figures in the budget, as they have already done,” Aix stated.
He expressed regret that the Council has begun with a blank slate and implemented a single module per square metre, despite the fact that the construction costs and land impact in Orihuela Costa, Orihuela City, the districts, and the distributed areas differ significantly by location.
According to the spokesperson for Ciudadanos, a development company in Orihuela Costa cannot be taxed in the same manner as an individual who is endeavouring to execute a housing development or renovation in a hamlet. Additionally, he expressed concern regarding the implementation of the discounts mentioned in the text and the fact that they are not extended to a greater number of cases than those included in the update.
Author: Derek Appleton
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