Spain Puts 10 Percent VAT on Tourist Lets and Caps Rent Rises at 2 Percent in Two Housing Decrees

Spain's Council of Ministers approved two royal decree-laws on Tuesday 29 September that put a 10 percent VAT charge on tourist apartment lettings from December 2026, cap annual rent updates on contracts already in force at 2 percent, and bar corporate buyers from acquiring a home for less than 70 percent of its appraised market value until 31 December 2028. The government has asked Congress for an extraordinary plenary session on Friday 2 October to validate both texts.

What it means for a foreign buyer

If you own a Spanish flat and let it to tourists, the economics change in December. Short-term tourist lettings have sat outside VAT; the decree brings them in at 10 percent. That is a charge on the letting itself, not a deduction against profit, so on a property grossing 30,000 euros a year in holiday rent the headline cost is 3,000 euros unless you raise nightly rates or restructure. The government initially floated 21 percent, so 10 percent is the softer end of what was on the table. Model your 2027 yield on the new rate now rather than on last season's numbers.

If you use seasonal or room-by-room contracts to keep a property flexible, that route narrows sharply. Seasonal contracts are capped at 12 months and require a documented, verifiable reason for the tenant's temporary stay, and chaining more than two consecutive ones converts the arrangement into a permanent residential lease with full tenant protection. Room rents inside one dwelling can no longer add up to more than the rent for the whole unit. Separately, if you were planning to sell with vacant possession or move back in during 2027, check your lease end date: contracts expiring before 31 December 2028 roll over automatically for two years unless you have justified cause and compensate the tenant.

Get your letting structure reviewed before December, because the VAT start date does not wait for the lease to end.

What changed

The rent measure has two layers. Contracts priced above the official reference index are frozen through 31 December 2027. Everything else is limited to a 2 percent annual update, replacing the previous indexation formula.

On purchases, no legal entity whose corporate purpose includes acquiring real estate may buy a dwelling for less than 70 percent of its market appraisal value. The restriction runs to 31 December 2028 and carves out social rental operators, sociosanitary residences and third-sector bodies. It is aimed at bulk distressed-portfolio buying and applies to companies, not to individuals purchasing in their own name.

Tax changes run in both directions. VAT on protected and publicly developed housing falls to the 4 percent superreduced rate. SOCIMIs, Spain's listed property vehicles, face a 25 percent charge on undistributed profits from residential letting, up from 15 percent, reduced where more than 80 percent of the portfolio qualifies as affordable housing. Municipalities may double the IBI local property tax on homes empty for more than three years. A new ICO-backed scheme, Tu Casa, lends first-time buyers up to 20 percent of the purchase price at zero interest, capped at 50,000 euros. Eviction protection for vulnerable households without alternative housing is extended to 31 December 2030.