Taxes for Non-Residents Owning Property in Fuengirola and Mijas

Owning property in the beautiful Costa del Sol, particularly in popular areas like Fuengirola and Mijas, can be an excellent investment for non-residents. However, it’s crucial to be aware of the various taxes that property owners are required to pay, even if the property is not rented out. Failure to comply with these tax obligations can lead to fines and legal issues with Spanish tax authorities. This guide provides an overview of the main municipal and state taxes applicable to non-residents owning real estate in Fuengirola and Mijas.

Municipal Taxes for Non-Residents Owning Property.

Non-residents who own property in Fuengirola and Mijas are subject to several municipal taxes. These taxes are collected by the local authorities and are mandatory regardless of the property’s use.

1. Property Tax (IBI - Impuesto sobre Bienes Inmuebles)

The most common municipal tax for property owners in Spain is the Property Tax, known as IBI (Impuesto sobre Bienes Inmuebles). This tax is paid annually and is based on the cadastral value of the property, which is set by the local authorities and usually lower than the market value.

• Who pays IBI? Every property owner, including non-residents, must pay this tax.

• How is it calculated? The tax rate varies depending on the municipality, but typically ranges between 0.4% and 1.1% of the cadastral value.

• Payment schedule: IBI is usually paid once a year, and property owners are notified in advance of the payment deadline.

2. Garbage Collection Tax (Tasa de Recogida de Basura)

This municipal tax covers the cost of waste collection services provided by the local council. The amount varies depending on the municipality and the type of property.

• Who pays the garbage collection tax? All property owners, including non-residents, are required to pay this fee.

• How is it calculated? The amount is typically fixed, although some municipalities may adjust the fee based on the size or use of the property.

State Taxes for Non-Residents Owning Property

In addition to municipal taxes, non-resident property owners in Fuengirola and Mijas must also pay certain state taxes. These taxes apply whether the property is rented out or not.

1. Non-Resident Income Tax (IRNR - Impuesto sobre la Renta de No Residentes)

Non-resident property owners are required to pay Non-Resident Income Tax (IRNR) on income derived from renting out their property in Spain. Even if the property is not rented, non-residents must still pay this tax based on a deemed rental income.

• Tax on actual rental income: If you rent out your property, you are subject to tax on the rental income received. The tax rate is 24% for residents of non-EU countries and 19% for residents of EU countries, Iceland, and Norway.

• Deemed rental income tax: If your property is not rented, the Spanish tax authorities assume a notional rental income, usually calculated as 1.1% of the cadastral value (or 2% if the cadastral value has not been revised in the last 10 years). This deemed income is then taxed at the same rate as actual rental income.

• Payment schedule: Taxes on actual rental income must be declared and paid quarterly, while the tax on deemed income is paid annually.

2. Wealth Tax (Impuesto sobre el Patrimonio)

Wealth Tax is an annual tax applicable to individuals whose net assets exceed a certain threshold. Non-residents are only taxed on assets located in Spain, including property.

• Who pays Wealth Tax? Non-residents with assets in Spain valued above €700,000, excluding a personal allowance of €300,000 for a main residence, must pay Wealth Tax. For many, this is primarily applicable to high-value properties.

• How is it calculated? The tax rate ranges from 0.2% to 2.5%, depending on the total value of the assets.

3. Capital Gains Tax (CGT - Impuesto sobre la Renta de No Residentes en la Venta de Inmuebles)

If a non-resident sells a property in Spain, they are required to pay Capital Gains Tax on the profit from the sale.

• Who pays CGT? Non-residents must pay CGT on the gain made from selling a property in Spain.

• How is it calculated? The tax rate is 19% for residents of EU countries, Iceland, and Norway, and 24% for residents of other countries.

Tax Obligations Even When Not Renting Out the Property

One of the most critical aspects for non-resident property owners to understand is that taxes are still payable even if the property is not generating rental income. The Spanish tax authorities consider that owning a property implies a potential rental income, and thus the deemed rental income tax must be paid annually.

Failing to pay these taxes can lead to significant penalties, interest charges, and even legal action. Spanish tax authorities are increasingly vigilant in enforcing compliance, especially as they have access to property data and can easily track unpaid taxes.

Penalties for Non-Compliance.

Non-compliance with tax obligations can result in fines, interest charges on unpaid taxes, and other legal consequences. The fines can be substantial and may increase over time if the taxes remain unpaid. Therefore, it is crucial for non-resident property owners to stay informed about their tax responsibilities and ensure that they are up to date with all payments.

Owning property in Fuengirola and Mijas offers many benefits, but it also comes with tax responsibilities that non-residents must not overlook. From municipal taxes like IBI and garbage collection fees to state taxes on actual or deemed rental income, understanding and fulfilling these obligations is essential to avoid costly penalties.

For non-resident property owners, it is highly advisable to seek professional advice or hire a local tax advisor who can assist with the accurate calculation and timely payment of taxes. Staying compliant not only helps you avoid fines but also ensures that your investment in Spain remains profitable and hassle-free.