Proposes raising VAT from 10% to 21% VAT on short-term tourist rentals
The Spanish government is seeking parliamentary agreement for a VAT rate doubling on short-term tourism rentals.
The new proposal would apply the standard VAT rate of 21% to short-term property rentals lasting under 30 days, marking a significant change from the current exemption regime. This would result in such rentals being taxed at more than double the 10% reduced rate applied to hotel accommodation. Under the new measure, short-term tourist rentals would be shifted from exemption status to the 21% standard rate, aligning them with commercial services and professional leasing.
Read more in our Spanish VAT guide.
Currently, short-term property rentals in mainland Spain are generally exempt from VAT, provided they do not offer hotel-like services. In contrast, hotels and similar establishments benefit from a reduced VAT rate of 10%, as per Spain’s Law 37/1992 on VAT (Ley del Impuesto sobre el Valor Añadido).
VAT hike following local resident protests on lack of affordable housing
Last week, the government had called for the removal of the listings of nearly 66,000 properties on rental platform Airbnb on the grounds that they breach regulations for tourist accommodation.
The clampdown comes as protests against over-tourism have begun ahead of the summer season. Demonstrations in the Canary Islands on Sunday attracted thousands of people.
Scope and Impact of the Proposal
The proposed VAT rate would apply to residential accommodations rented for stays under 30 days, particularly those that do not qualify as long-term leases or lack hotel-like services such as reception or cleaning. The move would primarily impact the 30% of Spain’s 94 million annual tourists who opt for private rentals over traditional hotels.
If approved, this reform could significantly alter the cost structure and business models of platforms offering short-term accommodations, such as Airbnb and Vrbo, especially in high-demand regions like the Balearic and Canary Islands, where short-term rentals already attract 7% Canary Islands IGIC—a local VAT-equivalent.
Legal and Economic Considerations
According to Housing Minister Isabel Rodríguez, the new tax is part of a broader bill aiming to “guarantee the right to rental housing for families” and curb speculative use of the housing market. A Bank of Spain report estimates a shortage of 450,000 housing units, with half of the housing in island territories being used for tourism or owned by non-residents.
The reform also includes:
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A 100% property acquisition tax on non-EU citizens who do not intend to use the property as a primary residence.
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Increased levies on vacant homes, including second residences.
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Local licensing restrictions: for instance, Barcelona plans to ban all short-term tourist rentals by 2028, while Madrid and Malaga are already capping new licenses.
Overview of Spanish VAT Rates and Scope
Spain applies a multi-tiered VAT system consisting of three primary rates:
|
VAT Rate |
Description |
Main Supplies Covered |
|---|---|---|
|
21% |
Standard rate |
Most goods and services not qualifying for reduced rates |
|
10% |
Reduced rate |
Hotel accommodation, passenger transport, restaurant meals, certain food and drink products, cultural events |
|
4% |
Super-reduced |
Basic food items, books, newspapers, certain medicines |
