Apartments and Residences Without Hotel Services. VAT Exemption

Renting out vacation apartments, homes, or parts of homes often raises questions regarding VAT. The main issue does not depend solely on whether the property is advertised on a tourism platform, the length of the stay, or whether an administrative license exists, but rather on whether the landlord merely makes the property available to the guest or also provides services typical of the hotel industry.

This publication was based on Binding Ruling V1781-17, dated July 10, 2017, regarding the rental of apartments, homes, or parts of homes without the provision of services typical of the hotel industry. The ruling remains a useful reference, but its explanation should be updated so that property owners, vacation rental managers, real estate investors, and companies in the sector can more clearly distinguish when a rental is subject to and exempt from VAT, and when it may be subject to VAT but not exempt.

The regulation must be analyzed based on Law 37/1992 on Value-Added Tax, particularly Article 20.1.23, and the guidelines published by the Tax Agency regarding the rental of tourist apartments and VAT.

2026 Update: Why It’s Still Important to Distinguish Whether Hotel Services Are Involved

In 2026, the distinction between tourist rentals without hotel services and the provision of lodging services remains a key factor. The Tax Agency, regarding tourist apartment rentals and VAT, maintains the position that rentals of tourist accommodations in which the landlord does not provide services typical of the hotel industry are exempt from VAT, without prejudice to their liability for any other applicable taxes.

Conversely, when services typical of the hotel industry are provided in addition to lodging, the rental of the vacation apartment is no longer exempt from VAT and must be taxed as a lodging service, in accordance with the reduced rate established for certain hospitality services in Article 91.Section 1.2.2 of the VAT Law.

This distinction has significant practical implications: it affects billing, the obligation to collect and remit VAT, the deduction of input tax, VAT treatment, and the way in which contracts and property documentation must be organized. Therefore, before starting or modifying a vacation rental business, it is advisable to review the actual business model and not limit oneself to the trade name used.

When Is the Rental of Apartments or Homes Exempt from VAT?

Article 20.1.23 of the VAT Law exempts certain leases involving buildings or parts thereof used exclusively for residential purposes. With regard to tourist apartments, the Tax Agency clarifies that, although those who rent out tourist accommodations are considered business operators for VAT purposes, the rental may be subject to or exempt from VAT when services typical of the hotel industry are not provided.

This can occur, for example, when the owner or manager simply grants the use of an apartment, home, or part of a home for a specified period, without organizing a lodging service comparable to that of a hotel. In these cases, the transaction does not involve charging VAT, although it may have other tax, census, regional, or municipal implications that must be analyzed separately.

1. Simply making the home available

The property is simply made available when the landlord hands over the property for the tenant’s use, without providing any additional services typical of hotel accommodations during the stay. This may include the handover of keys, initial or final cleaning, a change of linens upon check-in or check-out, and occasional assistance with repairs, without this necessarily turning the arrangement into a hotel service.

2. Vacation rentals without hotel services

Vacation rentals without hotel services may be intended for temporary stays, vacations, or uses other than permanent residence. However, from a VAT perspective, what matters is that no typical lodging services are provided. The Tax Agency’s guidance on VAT for vacation rentals expressly states that these rentals are exempt when they do not include complementary services typical of the hotel industry.

3. Rental with on-site hospitality services

When the landlord provides services typical of the hotel industry, the rental is no longer treated as a mere transfer of the use of the dwelling. In such cases, the transaction is considered a lodging service and is subject to—rather than exempt from— VAT, with the applicable rate determined in accordance with the VAT Law and current administrative guidelines.

4. Rentals for Non-Residential Use

Tourist rentals without hotel services must be distinguished from other leases for non-residential use. If the property is rented for use as an office, professional practice, business activity, warehouse, commercial space, or other non-residential purpose, the residential exemption may not apply. In these cases, each transaction must be reviewed on a case-by-case basis.

5. Rentals to companies or legal entities

Leasing to companies or legal entities requires special caution. It is not enough for the property to be physically a residence: one must analyze who the tenant is, what the agreed-upon use is, who actually uses it, and whether the property is actually used to house people or for a business activity. In contracts with companies, intermediaries, agencies, or property managers, it is advisable to review the contractual chain and the economic purpose of the transaction.

What Are the Services Unique to the Hotel Industry?

The services specific to the hotel industry are those that make the business go beyond the mere temporary rental of the property. According to the Tax Agency’s guidelines on the taxation of tourist apartment rentals, the lodging business is characterized by providing customer service that goes beyond simply making a residence or part of it available.

Services that can be considered specific to the hotel industry include, among others:

• Reception and round-the-clock customer service in a space designated for that purpose.
• Regular cleaning of the property and the accommodations during your stay.
• Regular replacement of bed linens and towels during your stay.
• Laundry services are available to guests.
• Luggage storage, newspapers, reservations, or other additional guest services.
• Meal, dining, or breakfast services, when included as part of the lodging service.

The key lies not in a single, isolated service, but in determining whether the set of services offered constitutes an accommodation business. Therefore, a contract, a commercial website, or a description on a platform must be consistent with the service actually provided.

What Services Do Not Necessarily Make a Rental a Hotel Service?

Not all ancillary services automatically classify a rental as a hotel business. The Tax Agency’s guidelines on VAT for tourist apartments state that certain services related to the condition and maintenance of the property are not, on their own, considered complementary services typical of the hotel industry.

In particular, the following are not usually considered:

• Cleaning of the apartment at the beginning and end of each tenant’s lease term.
• Changing of linens in the apartment at the beginning and end of the rental period.
• Cleaning of the building’s common areas, entrance, stairwells, elevators, and the surrounding grounds.
• Technical support and maintenance services for one-time repairs related to plumbing, electrical work, glasswork, blinds, locksmith services, or appliances.

These services may qualify as a VAT-exempt vacation rental when they are limited to preparing or maintaining the property and do not involve the ongoing services typical of a lodging establishment. However, if they are combined with other ongoing services provided to the customer, the tax classification of the transaction may change.

Circumstances in Which Rent May Be Subject to VAT Rather Than Exempt from It

The rental of apartments, homes, or portions of homes may be subject to VAT and not exempt when the transaction does not qualify for the housing exemption or when it includes services typical of the hotel industry. In practice, it is important to pay attention to the following scenarios:

• Provision of hotel services during the stay: periodic cleaning, regular change of bed linens and towels, 24-hour front desk service, luggage storage, laundry, and dining services.
• Rental for business or professional purposes: use as an office, workspace, operational headquarters, workspace, consultation space, or for economic activities.
• Leasing to intermediary companies: the transfer of the property to a company that operates it on behalf of third parties, when the lease is not for direct residential use.
• Mixed-use or complex contracts: transactions that combine lodging, management, guest services, marketing, and other additional services.
• Accommodation services organized as a business activity: models that, in practice, resemble a hotel or tourist accommodation facility offering round-the-clock service.

In these cases, it may be necessary to charge VAT, issue an invoice in accordance with the applicable rules, and review the potential deduction of input tax. The determination should not be based on the trade name of the business, but rather on the actual nature of the service provided.

Common Mistakes Made by Owners and Managers of Vacation Rentals

Errors in the taxation of short-term rentals are usually due to an incorrect classification of the activity or a lack of contractual documentation. Among the most common are:

• Believing that all vacation rentals are subject to VAT. If services typical of the hotel industry are not provided, the business may be subject to taxation or exempt.
• Believing that no vacation rentals are subject to VAT. If hotel services are provided, the transaction may no longer be exempt.
• Confusing a tourist license with VAT taxation. Regional tourism regulations and tax classification do not always align.
• Do not review contracts with management companies. The involvement of a company, agency, or platform may affect the analysis if it changes the recipient or the nature of the service.
• Using ambiguous product descriptions. Advertising 24-hour care, laundry, or periodic cleaning services may have tax implications if those services are actually provided.
• Do not separate ancillary services. For some models, it is a good idea to check whether there is a single main accommodation feature or several distinct features.
• Applying criteria from other taxes to VAT without conducting a separate analysis. Each tax has its own specific rules.

These errors can affect small property owners as well as professional property managers or investors who manage multiple properties. For transactions involving significant volumes, it is advisable to review the tax, contractual, and operational frameworks in advance.

Documentation and criteria to review

Before declaring a transaction as VAT-exempt or non-exempt, it is advisable to gather and review the documentation that describes the actual activity. This review helps avoid inconsistencies between what is reported for tax purposes, what is offered to the customer, and what is agreed upon in the contracts.

• Lease Agreement or General Booking Terms and Conditions.
• Ad description on tourism platforms or the company’s own website.
• List of services included in the price.
• Cleaning procedures, linen changes, reception, and customer service.
• Invoices issued by the owner, manager, or intermediary.
• Contracts with companies that provide tourism management, cleaning, maintenance, or guest services.
• Actual use of the property and tenant profile.
• Licenses, tourism registrations, or applicable administrative filings.
• The approach followed with respect to VAT and any other applicable taxes.

For properties managed by companies or used within corporate structures, it may also be advisable to review the contractual, corporate, and tax documentation. In these situations, IN DIEM Abogados can provide support on matters related to the rental of vacation apartments and on transactions involving real estate investment or asset management.

Reference to Binding Ruling V1781-17

Binding Ruling V1781-17, dated July 10, 2017, analyzed a case involving the rental of apartments, homes, or parts of homes without the provision of services typical of the hotel industry. Its legal significance lies in the fact that it confirms a principle that remains essential: VAT exemption depends on the actual nature of the lease and the services actually provided.

This ruling should not be interpreted as a general authorization to consider any tourist rental exempt. Its purpose is to reinforce the principle that the mere transfer of the use of a residence, without hotel services, may be subject to or exempt from VAT. However, when the activity includes services typical of lodging, the VAT treatment may change.

This criterion is consistent with the Tax Agency’s current guidance on the taxation of tourist apartment rentals, which distinguishes between tourist rentals, complementary services, and services typically provided by the hotel industry.

How IN DIEM Abogados Can Help

At IN DIEM Abogados, we analyze the taxation of rentals of tourist apartments, homes, or portions of homes from a tax, contractual, and business perspective. This review can be particularly useful when there are questions regarding the application of the VAT exemption, the provision of hotel services, or the involvement of management companies.

Our advisory services may include reviewing contracts, advertisements, invoices, booking terms, services provided, management structures, and related tax obligations. We may also coordinate with other departments within the firm when the property is part of a business investment, a holding company, or a tourism management operation.

If the issue affects vacation rentals or the continuity of business operations, it may be advisable to also review the suspension of operations for vacation rentals. For an initial review of the documentation, you can request an online consultation with IN DIEM Abogados.

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We offer our clients the option of receiving assistance via video call or videoconference, as well as by phone, depending on their preference, so that the assistance is as personalized as possible, provided immediately, and without the need to travel. This service is complemented by communication via email, which facilitates the review and submission of documentation.

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