VAT on Holiday Rentals in Spain: When Does IVA Apply?

Many owners who rent out their holiday home in Mallorca via Airbnb or Booking assume that VAT (Spanish: IVA) doesn't concern them – after all, it's "only" a holiday apartment, not a hotel. That's a misconception with expensive consequences. Whether IVA applies to holiday rentals in Spain doesn't depend on the size of the apartment, but on which services you provide during your guests' stay – and in which region of Spain your property is located. In this guide, you'll learn when VAT liability applies in the Balearic Islands, why the Canary Islands have their own system, what deadlines apply for reporting, and which reforms are already on the horizon but (as of 2026) not yet in force.

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The basic rule: when IVA applies to holiday rentals

The decisive factor is not the rental platform, but the type of service provided. Pure provision of accommodation – you hand over the keys, the guest stays, you change the bedding and clean the apartment between bookings – is treated for tax purposes similarly to a long-term rental and is generally VAT-exempt. However, as soon as you provide additional services during the stay that are typical of the hotel sector, the rental becomes a VAT-liable service.

Such "ancillary hotel-sector services" include, among others:

• Reception or front-desk service
• Cleaning of the apartment during the ongoing stay (not just when guests change over)
• Laundry service during the stay
• Catering, e.g. breakfast service

Note: If these additional services are entirely absent, the holiday rental remains VAT-exempt – regardless of whether you rent via Airbnb, Booking.com, or directly.

The Balearic rule in detail

In Mallorca and the rest of the Balearic Islands, the following applies: private touristic rental requires a permit (ETV licence) and becomes subject to VAT as soon as ancillary services from the hotel sector are provided. Without such additional services, the rental remains VAT-exempt – despite the licence requirement. If IVA becomes due, a rate of 10 % on the touristic accommodation service currently applies (as of 2026).

Anyone unsure whether their own licence is even transferable or valid can find details in the guide on Transferring the ETV licence.

Special case Canary Islands: IGIC instead of IVA

Important for anyone who, besides Mallorca, also rents out property in Tenerife, Gran Canaria or Fuerteventura: there, Spanish IVA does not apply, but rather the Canary IGIC (Impuesto General Indirecto Canario) with a general rate of 7 %. Since 1 January 2024, a tightened special rule has also applied: the touristic rental of properties owned by non-tax-residents is now generally subject to IGIC – the small business exemption no longer applies there. This means: for every €100 of rental income, an additional €7 IGIC is added, which must be paid quarterly to the Canary tax authority. In return, input tax deduction on expenses (e.g. Booking invoices) is possible.

Distinction from commercial letting (shop premises, commercial space)

You shouldn't confuse holiday letting with the commercial letting of business premises – different rates and reporting obligations apply here. If, for example, you let a shop premises in Mallorca to a Spanish company, since 1 January 2023 you, as a non-resident registered landlord, must state and remit 21 % IVA yourself. Until the end of 2022, the reverse charge mechanism placing the tax liability on the tenant still applied here.

Note: In the case of commercial letting to a Spanish company, in addition to the quarterly VAT return, an annual return in January is also due, as well as – for rental income exceeding €3,006 per year – the collective tax return Modelo 347 in January/February of the following year.

Why there is (still) no small-business scheme

EU Directive (EU) 2020/285 provided that micro-enterprises with an annual turnover below €85,000 could be exempted from VAT liability EU-wide from 1 January 2025 – comparable to the German small-business model. Spain has to this day not implemented this directive and has thus missed the EU deadline. The European Commission has therefore formally taken legal action against Spain before the European Court of Justice.

For you as a landlord, this specifically means: regardless of how low your rental income is, as soon as a VAT liability exists in principle (e.g. through ancillary services), you must continue to charge VAT and file quarterly returns via Modelo 303. There is currently no de minimis threshold in Spain.

Planned reform: Is the increase to 21% IVA coming?

At the end of June 2026, the Spanish government announced a Real Decreto-ley that would, among other things, raise IVA on holiday rentals from 10% to 21% – linked to new tenant protection rules for seasonal contracts. However, the Council of Ministers withdrew the decree from the agenda because the necessary political majorities were lacking (Podemos rejected the underlying land law reform, while Junts demanded improvements to landlord incentives). A return to the agenda was promised for the first Council of Ministers meeting in September.

Note: As of 2026, no published text regarding this increase has appeared in the BOE. Even after passage, Congress would have to confirm such a Decreto-ley within 30 days – something an earlier attempt (RD-ley 8/2026) already failed to achieve in April.

Independently of this, there is another, more distant reform approach: according to current plans, from 1 July 2028 Spain is to levy IVA on all short-term tourist rentals of up to 30 nights – regardless of whether additional services are provided. This too is not yet applicable law, but an announced proposal.

Modelo 303: Registration and deadlines

If you are liable for IVA, you must register in Spain as a non-resident taxable person for VAT purposes and submit the Modelo 303 quarterly.

1. Apply for tax registration in Spain (NIE/NIF required)
2. Issue invoices showing IVA to guests or booking platforms
3. Submit the quarterly declaration via Modelo 303
4. Additionally file an annual declaration in January
5. For rental income over €3,006 per year: Modelo 347 in January/February of the following year

IVA versus income tax (IRPF/IRNR): don't confuse them

A common misunderstanding: IVA and income tax on rental income are two separate taxes with different forms. VAT concerns the service itself (Modelo 303), whereas income tax on the income earned is declared via Modelo 210 (IRNR for non-residents). With Orden HAC/623/2026 (published in the BOE of 23 June 2026), the forms Modelo 210, 211 and 213 were amended: deductible costs must now be broken down separately per property, and a new payment deadline applies for rental income, running from 1 to 20 April of the following year – already applicable for income earned in 2026.

Details on income tax on rental income as a non-resident can be found in the guide Taxing rental income as a non-resident.

Fines and compliance risks

Besides the pure IVA question, missing or incorrect registration of tourist rentals can result in severe sanctions. Without a valid tourist rental licence, fines of up to €30,000 may be imposed. The Balearic government has also set up a so-called Mesa del Intrusismo: daily fines of €500 to €5,000 for as long as an illegal listing remains active after an official notice, with referral to the public prosecutor after two ignored notices. Anyone who converts their listing into affordable rental housing can receive a reduction of up to 80% on the fines.

Since 2 January 2026, Regulation VAU/1560/2025 has also been in force, requiring landlords of short-term rentals to report booking data for informational purposes to the Land Registry. More on the formal requirements can be found in the guide on Subletting in Spain.

Most common mistakes

• Holiday rental is generally assumed to be VAT-exempt, even though cleaning or breakfast is offered during the stay
• The Balearic rule is confused with the Canary Islands' IGIC rule
• It is assumed that there is already an €85,000 small-business threshold as in Germany
• Announcements about the 21% reform are treated as already applicable law
• IVA (Modelo 303) and income tax (Modelo 210) are mixed up
• The lack of an ETV licence is underestimated, even though fines of up to €30,000 are possible

Checklist for landlords

1. Check whether hotel-sector ancillary services are provided during the guest's stay
2. Clarify regional classification: Balearic Islands/mainland (IVA) or Canary Islands (IGIC)
3. If IVA liability applies: arrange tax registration in Spain
4. Note Modelo 303 deadlines in your calendar (20/4, 20/7, 20/10, 31/1)
5. Check Modelo 210 deadlines for income tax separately
6. Check the ETV licence and reporting obligations (VAU/1560/2025)
7. Monitor developments regarding the 21% reform and the small-business scheme

For the ongoing management of these obligations, it is often worthwhile to use a Property management for holiday properties.

What comes next?

The tax landscape for holiday landlords in Spain will remain in flux in 2026: the ECJ case against Spain could lead to a small-business exemption at the earliest in 2027, more realistically in 2028. At the same time, the politically contentious increase of IVA on holiday flats from 10% to 21% is under discussion, as is a possible general IVA obligation on all short-term rentals of up to 30 nights from July 2028. Anyone renting out property now should keep an eye on both developments without acting today according to rules that are not yet in force. An overview of further regulatory conditions is provided in the guide to the Ley Vivienda Balearic Islands.

Conclusion

Whether VAT applies to your holiday rental in Spain depends on the type of service provided, not on the size of your business. In the Balearic Islands, pure provision of accommodation remains VAT-free, while hotel-like additional services trigger 10% IVA. In the Canary Islands, a stricter, general IGIC obligation of 7% has applied since 2024. Despite EU requirements, Spain still has no small-business threshold like Germany's – and the announced increase to 21% is not yet law either. Those who clearly distinguish between IVA (Modelo 303) and income tax (Modelo 210), meet deadlines and keep an eye on their licence avoid the costliest mistakes.

Official sources

• Council Directive (EU) 2020/285 on the small-business scheme – implementation status in Spain and the ECJ case: steuerberatermallorca.com
• Orden HAC/623/2026 (Modelo 210/211/213, BOE of 23 June 2026) and current regulatory developments: propertyhost.es/de/actualidad
• Regulation VAU/1560/2025 on the reporting obligation for short-term rentals (valid from 2 January 2026): legalium.de/touristische-vermietung-spanien
• ADVANCE LEGALTAX SOLUTION SL – Tourist rentals in Spain, VAT (IVA/IGIC): steuerberaterspanien.com
• ADVANCE LEGALTAX SOLUTION SL – Tax obligations for property owners in Spain 2026: steuerberaterspanien.com
• Mallorca Tourism Tax & Taxes for non-residents: mallorca.com
• Holiday letting in Spain – VAT liability: willipedia.plattes.net