The Spanish Government has approved a significant change to the VAT treatment of furnished holiday rentals, potentially bringing many property owners within a tax regime that, until now, they may not have needed to consider. Under the new rules, certain short-term rentals will become subject to 10% VAT from 1 December 2026, provided the legislation remains in force.
The measure is included in Royal Decree-Law 29/2026 of 6 October, published in Spain’s Official State Gazette (BOE) on 7 October 2026.
However, the change comes with an important qualification: the decree must still complete the parliamentary procedure required for its ratification. Given the recent history of similar legislation, property owners should understand both the proposed changes and the uncertainty surrounding their implementation.
A New VAT Rule for Short-Term Rentals
Until now, renting out a furnished property has generally been exempt from VAT where the landlord does not provide services characteristic of the hotel industry. These services may include restaurant facilities, regular cleaning during a guest’s stay, laundry and comparable hotel-style services.
The new provision introduces an additional criterion based on the duration of the rental.
From 1 December 2026, furnished apartments and dwellings rented to the same tenant for no more than 30 nights will generally become subject to 10% VAT. The exception is where the rented property is the landlord’s habitual residence, in which case the rental remains exempt under this provision.
The practical implications are significant:
- Stays of up to 30 nights: generally subject to 10% VAT, unless the habitual-residence exception applies.
- Stays exceeding 30 nights: the new duration-based rule does not, by itself, remove the VAT exemption. The other applicable conditions must still be considered.
- Accommodation with hotel-style services: may already be subject to 10% VAT under the existing rules.
Importantly, the provision is not restricted to properties advertised through Airbnb or Booking.com, nor does it apply exclusively to landlords operating through a company. The relevant factors include the nature of the accommodation, the duration of the stay and the applicable statutory exceptions.
Does This Affect Private Property Owners?
Yes. The distinction between an individual landlord and a company is not, in itself, decisive for VAT purposes.
Spanish VAT legislation can treat individuals who exploit property to generate continuing income as taxable persons carrying on an economic activity for VAT purposes. Consequently, a private individual renting out a holiday apartment may have VAT obligations even without operating through a limited company.
This does not automatically mean that the landlord must establish a company or that the rental income will necessarily be treated as income from an economic activity for Spanish Personal Income Tax (IRPF). VAT and IRPF operate under different rules, and each must be assessed separately.
For owners who have previously treated their rental income as exempt from VAT, the proposed change could therefore require a review of their existing tax arrangements.
How Much Will the New VAT Cost?
The applicable rate under the new provision is 10%. However, the financial impact will depend on whether the landlord increases the price charged to guests or absorbs the tax within the existing rental price.
Consider a property currently rented for 1.000,00 €.
Option 1: VAT is added to the existing price
- Rental price: 1.000,00 €.
- VAT at 10%: 100,00 €.
- Total payable by the guest: 1.100,00 €.
In this scenario, the landlord retains the €1,000 rental price before other expenses and taxes, while the guest pays the additional VAT.
Option 2: The final price remains 1.000,00 €
If the landlord keeps the total price unchanged, the amount includes the VAT:
- Taxable amount: 909,09 €
- VAT included: 90,91 €
- Total payable by the guest: 1.000,00 €
In other words, maintaining the same advertised price reduces the landlord’s net rental income. Increasing the price, on the other hand, may affect the property’s competitiveness.
There is no universal answer as to which approach is preferable. Property owners will need to consider their market position, operating costs and pricing strategy before deciding how to respond.
Can Landlords Deduct VAT on Expenses?
One potentially important consequence of becoming subject to VAT is the possibility of deducting input VAT on qualifying business expenses.
Subject to the applicable conditions, this may include VAT incurred on expenditure such as:
- Electricity, water and gas.
- Property repairs and maintenance.
- Furniture and equipment.
- Professional advice and accountancy services.
- Advertising and certain other services connected with the rental activity.
The basic calculation is straightforward: VAT charged to guests, less deductible input VAT, determines the net VAT payable to the Spanish Tax Agency (AEAT).
However, not every expense will qualify for a deduction. The expenditure must satisfy the relevant requirements, have a genuine connection with the taxable activity and be supported by the appropriate documentation. The VAT treatment of costs associated with purchasing the property may also require a separate, more detailed assessment.
The introduction of VAT should therefore not be viewed simply as an additional 10% charge. It may also change how landlords account for the costs of operating their properties.
What Tax Obligations Could Arise?
If a property owner’s rentals become subject to VAT, their administrative responsibilities may increase considerably.
Depending on their circumstances, the relevant obligations may include:
- Updating their registration details with the AEAT through Modelo 036.
- Charging VAT correctly on taxable rentals.
- Issuing invoices in accordance with the applicable invoicing requirements.
- Maintaining appropriate records of sales and purchases.
- Retaining invoices supporting any input VAT deductions.
- Filing periodic VAT returns, normally through Modelo 303 where quarterly filing applies.
Owners using booking platforms should also review the documentation they receive and the way their transactions are processed. The VAT charged on accommodations is a separate matter from the VAT treatment of commissions or other services supplied by a booking platform.
For landlords who have never previously needed to account for VAT on their rental income, these requirements could represent a substantial change in their day-to-day administration.
What About Existing Reservations?
Reservations made before 1 December 2026 could raise questions where the booking, payment and actual stay occur at different times.
Spanish VAT legislation contains specific rules governing when VAT becomes chargeable, including provisions concerning advance payments. Consequently, the date on which a reservation is made should not automatically be treated as the only relevant factor.
The contractual arrangements, payment dates, any deposits or advance payments, and the timing of the accommodation service may all need to be examined.
Property owners with bookings extending into December should therefore seek clarification before deciding how the new rules apply to their particular circumstances. The treatment of transitional cases should not be assumed without considering the relevant legislation and any subsequent guidance from your tax advisor.
Political Uncertainty and the December Deadline
There is another reason why property owners should follow developments closely.
The previous Royal Decree-Law 26/2026, which addressed substantially similar housing measures, was repealed following its failure to obtain parliamentary approval. The Government subsequently approved Royal Decree-Law 29/2026 on 6 October, with the new VAT provision scheduled to take effect on 1 December 2026.
The timing is particularly sensitive because general elections are scheduled for 29 November 2026, just two days before the planned implementation date.
The legal position should nevertheless be distinguished from the political debate. An election does not automatically repeal legislation, and a change of government would not, by itself, remove the new VAT obligation. Any subsequent amendment or repeal would need to take effect through the appropriate legal process.
Until the parliamentary position becomes clearer, property owners should avoid assuming either that the measure will certainly proceed or that it will simply disappear.
What Should Property Owners Do Now?
Although the final implementation remains subject to the legislative process, owners can take sensible preparatory steps without making premature changes to their entire rental operation.
We recommend reviewing the following:
- Rental agreements and reservations: identify stays of 30 nights or fewer, particularly those scheduled for December 2026 onwards.
- Pricing arrangements: consider whether VAT could be added to existing prices or would need to be absorbed within them.
- Property-related expenses: organise invoices for supplies, repairs, furniture, professional services and other relevant expenditure.
- Booking platforms: review how guest payments, commissions and invoices are handled.
- Tax registration and reporting: assess what changes to registration, invoicing and VAT returns would be required if the new rules take effect.
The appropriate course of action will depend on the individual circumstances of each property owner. In particular, the habitual-residence exception, the duration of the tenancy and the services provided should be considered before determining the VAT treatment.
A Change That Deserves Attention
The proposed introduction of 10% VAT on certain short-term furnished rentals could represent a significant shift for property owners in Spain, including individuals who have never previously charged VAT on their rental income.
If the measure takes effect as scheduled, affected landlords will need to consider not only the additional tax but also its implications for pricing, deductible expenses, invoicing and ongoing compliance.
The distinction between a short-term holiday rental and a longer residential letting may become more important than ever. Equally, the fact that a property is privately owned does not automatically place its rental income outside the scope of VAT.
With the planned implementation date approaching and the parliamentary position still to be resolved, preparation is sensible. However, the precise obligations should be confirmed against the legislation in force at the relevant time.
At Spence Clarke, we will continue to monitor developments and provide updates as the legal position becomes clearer.
