Spain’s New 10% VAT on Holiday Rentals: Key Insights for Owners

Spain has rolled out a 10% VAT on short-term holiday rentals, affecting owners who lease properties for 30 days or less. This change, introduced under Royal Decree-law 29/2026, became effective on 8 October, although the VAT is scheduled to be enforced from 1 December 2026. The tax applies even if no hotel-like services are provided, altering previous exemptions.

This policy shift could significantly impact the Canary Islands’ rental market, where international property owners may need to rethink their pricing strategies. For instance, a weekly rental currently priced at €1,000 might rise to €1,100 with the added VAT, unless owners decide to absorb the tax, thus reducing their net earnings. Additionally, owners must now register for VAT, which introduces more paperwork and potential costs, even for those renting sporadically.

While the decree is active, it still requires parliamentary approval, with a vote anticipated on 12 November. If the decree is rejected or if political shifts occur after the 29 November general election, the VAT measure may not proceed. This uncertainty places owners in a challenging position, needing to plan for possible changes while awaiting further guidance from the Spanish Tax Agency.