Lorraine Williamson
Spain’s ruling Socialist Party (PSOE) has proposed a significant reform of the country’s housing market, including plans for Spain to raise VAT on tourist rentals to reduce market distortions and improve housing access.
At the heart of the plan is a proposed increase in VAT on tourist rentals, a move expected to align them with hotel-style accommodations and reduce pressure on the long-term housing market.
VAT on holiday lets set to double
Under current regulations, tourist rentals in Spain are subject to a reduced VAT rate of 10%. The new proposal would raise this to 21%, matching the rate applied to hotels and other commercial lodgings. The government argues that this would level the playing field and curb unfair competition in the rental sector.
Landlords, particularly non-resident owners, are also reminded that they must declare rental income. In most cases, non-residents face a flat income tax rate of 24%.
New tax on foreign property buyers
To discourage speculative investment and improve access to housing for residents, PSOE also plans to introduce a state-level tax targeting property purchases by non-EU buyers and other non-residents. This tax would apply only to individuals and companies from outside the EU and would not be managed by regional governments. The measure is aimed at limiting housing inflation caused by external demand.
Notably, this tax would exclude professionals and entrepreneurs acquiring property for business use.
Local councils encouraged to raise taxes on vacant homes
Municipalities will be given the authority to increase the property tax (IBI) on vacant or secondary residences. The existing tax rates, which range from 1.1% to 2%, will be subject to new brackets set in cooperation with the Ministry of Finance. This is intended to push property owners to make unused homes available for rent.
Other housing reforms in the pipeline
Additional steps include transferring state-owned land to a new public housing company to expand affordable housing supply. Legal changes will also safeguard social housing and extend energy renovation tax breaks.
Public-private partnerships are being encouraged to boost housing construction. New contracts could run for up to 80 years to incentivise investment.
Tax incentives for affordable rental housing
Private landlords offering rents below the government’s benchmark may qualify for a full 100% tax deduction on net rental income. This measure is designed to increase the availability of low-cost rental options.
Fast-track implementation by mid-June
The PSOE aims to begin implementing these housing reforms in the first half of June, pending approval by the Congress of Deputies. Officials say swift action is necessary to counter growing housing inequality and speculative trends across Spain.
Tourist rental reforms