The VAT treatment of short-term vacation rentals—an increasingly widespread practice in many Spanish cities—could face a substantial changes. The government is considering a draft bill submitted by the Socialist Parliamentary Group on 22 May 2025 that would eliminate the VAT exemption for short-term rentals in the country with a view to aligning the treatment of such rentals and hotel accommodations (the latter being subject to the 10% reduced VAT rate), address the impact of tourism on the housing availability market and alleviate the housing shortage.
Under current law, the leasing of furnished apartments or dwellings—even for short stays (i.e., for tourist use)—is exempt from VAT, unless hotel-like complementary services are provided (such as periodic cleaning, linen changes, reception services, etc.). In such cases, the lease is taxed at the reduced VAT rate of 10%. The draft bill proposes limits on this exemption. If the measures are enacted, short-term leases (i.e., those for fewer than 30 nights) located in municipalities with more than 10,000 inhabitants (based on the latest Annual Population Census) would be subject to the standard 21% VAT, even if complementary hotel services are not provided. Additionally, the reduced 10% VAT rate for rentals of furnished apartments or dwellings where hotel complementary services are provided would not be available.
The measures proposed in the draft bill essentially would result in tourist rentals being taxed at the general VAT rate of 21%, regardless of whether hotel-type services are provided, as long as the lease is a short-term lease (under 30 days) in a municipality with more than 10,000 inhabitants. This would also affect the VAT recovery scheme; in cases where the tourist rental is subject to and not exempt from VAT, landlords would be entitled to deduct input VAT on goods and services directly linked to the activity.
Adoption of the proposals would mark a turning point in the taxation of vacation rentals in Spain. The VAT rate on short-term rentals would shift from an exemption to more than double the rate applicable to hotel stays, which likely would have a detrimental impact on vacation rentals—for both property owners and intermediary platforms—by making them less attractive than hotel accommodation.
Alvaro Gomez-Elvira
Alberto Cousillas
BDO in Spain
Under current law, the leasing of furnished apartments or dwellings—even for short stays (i.e., for tourist use)—is exempt from VAT, unless hotel-like complementary services are provided (such as periodic cleaning, linen changes, reception services, etc.). In such cases, the lease is taxed at the reduced VAT rate of 10%. The draft bill proposes limits on this exemption. If the measures are enacted, short-term leases (i.e., those for fewer than 30 nights) located in municipalities with more than 10,000 inhabitants (based on the latest Annual Population Census) would be subject to the standard 21% VAT, even if complementary hotel services are not provided. Additionally, the reduced 10% VAT rate for rentals of furnished apartments or dwellings where hotel complementary services are provided would not be available.
The measures proposed in the draft bill essentially would result in tourist rentals being taxed at the general VAT rate of 21%, regardless of whether hotel-type services are provided, as long as the lease is a short-term lease (under 30 days) in a municipality with more than 10,000 inhabitants. This would also affect the VAT recovery scheme; in cases where the tourist rental is subject to and not exempt from VAT, landlords would be entitled to deduct input VAT on goods and services directly linked to the activity.
Adoption of the proposals would mark a turning point in the taxation of vacation rentals in Spain. The VAT rate on short-term rentals would shift from an exemption to more than double the rate applicable to hotel stays, which likely would have a detrimental impact on vacation rentals—for both property owners and intermediary platforms—by making them less attractive than hotel accommodation.
Alvaro Gomez-Elvira
Alberto Cousillas
BDO in Spain