Malaga's tax revenue from foreigners has tripled since 2019 thanks to investments

The weight of foreign investment in Malaga province's real estate market has a very significant impact on tax revenue. According to reports, the tax revenue linked to the profits of non-residents is growing the most, mostly due to the income they receive from renting properties.

Taxpayers who do not reside in Spain but earn income within Spanish territory are subjected to the non-resident income tax, which replaces personal income tax and corporate income tax.

The province of Malaga's contribution to the state coffers through taxes has grown by 93.6% between 2019 and 2025, rising from more than 3.28 billion to almost 6.36 billion euros. This increase is double that recorded in Spain as a whole, which is 53%, climbing from 212.8 billion to 325 billion euros over the same period.

The greater economic dynamism of the Costa del Sol province and its transient population (tourists, visitors, digital nomads, etc.) explains this faster growth rate in tax revenue. The tax whose revenue has grown the most in Malaga has been the non-resident income tax: it has practically tripled, growing by 194%, going from 93.5 million in 2019 to 275 million in 2025. In any case, its revenue is limited compared to the more than 2.6 billion collected in the province from personal income tax or the more than two billion collected from IVA tax.

This tax is also the fastest growing in terms of revenue across Spain, although its increase is lower than that recorded in the province (limited to 128%, reaching almost 5.4 billion from 2.37 billion the year before the pandemic). Here too, the figure pales in comparison to personal income tax (142.5 billion) or IVA (almost 100 billion). In the latest annual report of the tax agency, tax officials highlighted the "strong upward trend" of this tax in the country and attributed it largely to "the high volume of income from real estate capital".

Foreign buyers play a significant role in the Malaga real estate market. According to data from the notary association, while 57.3% of those who buy a home in Malaga are Spanish, the remaining 42.7% are foreigners. In contrast, across Spain as a whole, the proportion is 80% national buyers versus 20% foreign buyers.

It turns out that two out of every three people of foreign origin who have bought a home in the province do not reside in Spain. What is lacking is data on how many of these non-residents who have bought a property in Malaga have done so exclusively for their own personal use or to rent it out. It is also unknown how many Spaniards residing abroad have bought homes to keep them as rental properties.

Although the non-resident income tax covers many things besides rents, such as interest, dividends or business profits, Complutense University Professor Jorge Onrubia says that what has grown the most in Malaga has been the real estate income of non-residents due to three main factors: more home purchases by foreigners, more presence of tourist and medium-term rentals, in addition to higher rents (Malaga is one of the provinces in Spain where rent has risen the most in recent years and where it is the most expensive).

"Real estate income is taxed where the property is located (Spain, Malaga, in this case), without exception. In contrast, dividends, interest or business profits are often reduced or shifted through double taxation agreements. That's why, even though other types of income exist, real estate income has a much greater impact on tax revenue," Onrubia states.

The professor also points out that international tourism is a factor influencing this dynamic because more foreign demand means higher occupancy rates and rental profitability, more foreign investment in housing and, consequently, more revenue from non-resident income tax.

Furthermore, he believes that the increase in revenue from this tax is also due to the tax agency's improved oversight of real estate income and to better information sharing between countries regarding the monitoring of tourist rentals. "This brings previously undeclared income to light," he says.

Onrubia also mentions that recent research indicates that this increased scrutiny by tax authorities, which means it is increasingly difficult to evade the tax, also leads to higher rental prices and, therefore, an increase in the tax base (landlords know they will have to pay taxes, so they raise the rent accordingly). So, in summary, the professor concludes: "The non-resident income tax skyrockets in Malaga mainly due to the foreign real estate boom and its exploitation in rentals, reinforced by higher prices and better tax control."

Santiago de Compostela University Professor César García Novoa says that while overall foreign investment in Spain has been declining in recent years, real estate investment has only increased, especially in areas with favourable climates, where the growth is exponential year after year. García Novoa adds that taxation for non-residents has also improved as a result of several rulings by the EU Court of Justice that grant them the same tax treatment as residents in terms of expense deductions. He also reminds the public of the threat posed by the implementation of a 100% property transfer tax if the transfer involves individuals from outside the EU, although he considers this an unlikely possibility.