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Spain Plans Tax Hike for Holiday Rentals Amid Rising Rents

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Spain is set to increase taxes on holiday rentals to ensure they are taxed “like a business,” according to Prime Minister Pedro Sanchez. This announcement comes as residents in major cities face escalating rental costs, prompting the government to take action to address the housing crisis.

Prime Minister Sanchez highlighted the current tax structure’s unfairness, stating, “It isn’t fair that those who have three, four, or five apartments as short-term rentals pay less tax than hotels or workers.” This initiative aims to create a more equitable taxation system, particularly in light of a new European Union directive on value-added tax (VAT) for digital platforms.

Currently, Spanish hotels benefit from a reduced VAT rate of 10%, which is included in customer bills. By implementing a tax hike on holiday rentals, the government hopes to level the playing field between traditional accommodations and short-term rental properties.

Housing affordability has become a pressing issue in Spain, as the nation struggles to balance the need to promote tourism—an essential part of its economy—with the rising rents caused by gentrification and the shift toward lucrative short-term rentals in urban and coastal areas. The influx of tourists has led to increased competition for housing, driving up rental prices and pushing locals out of the market.

In addition to the tax hike, Sanchez announced plans to strengthen measures against rental fraud. Recently, authorities initiated an investigation into Airbnb for failing to remove thousands of misleading rental listings from its platform. These actions reflect the government’s commitment to ensuring transparency and fairness in the rental market.

Furthermore, landlords in high-rent areas who maintain their rents in line with an official price index will benefit from a 100% tax exemption on that income. This incentive is designed to encourage fair pricing practices among landlords.

Sanchez also highlighted the government’s focus on promoting social housing construction and pledged to allocate 2 million square meters (21.5 million square feet) of residential land to a newly established public housing agency. However, the Prime Minister faces challenges in passing legislation due to a fragmented parliament, which complicates efforts to implement these housing proposals.

His Socialist Party’s housing initiatives have faced criticism from both the political right, which argues they are too interventionist, and hard-left allies who claim the measures do not adequately address issues related to abusive landlords. Sanchez reiterated that the government’s priority is to ensure residential housing is preserved and that speculative and tourist-oriented uses do not overtake the market.

Last year, the Bank of Spain warned that the high proportion of households struggling to pay rent, compared to other EU countries, could lead to significant economic and social repercussions. Rising anger among citizens has led to protests, as many feel they are being priced out of the market in a country traditionally dominated by homeowners.

As Spain moves forward with its plans to increase taxes on holiday rentals, the focus remains on finding a balance that supports tourism while addressing the critical housing needs of its residents.

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