If you rent out a tourist property in Spain, understanding how your rental activity is classified — and what expenses you can deduct — is essential for your Spanish income tax return (IRPF). The tax deadline closes on 30 June, so now is the perfect moment to ensure you are applying the correct deductions and following current regulations.

Short-term tourist rentals have specific characteristics—limited duration and optional hospitality-style services—that set them apart from long-term residential leases governed by the Ley de Arrendamientos Urbanos (LAU).

Because these rentals generate income, they also trigger tax obligations. Crucially, your tax treatment depends on the type of rental you provide, which in turn determines what deductions and obligations apply.

In this guide, we explain the two types of holiday rentals, the taxes that apply to each one, and the deductible expenses you can claim to reduce your tax liability.

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What Is Considered a Tourist or Holiday Rental in Spain?

A holiday rental is a property offered for short-term stays and promoted through platforms such as Airbnb, Booking.com, or similar channels. These rentals differ from long-term leases regulated by the Ley de Arrendamientos Urbanos (LAU).

As we mentioned before, your tax obligations depend on whether or not you offer hospitality services — and this directly affects how your income must be declared.

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Types of Holiday Rentals and Their Tax Implications‍

There are two categories of tourist rentals that must be reported to the Spanish Tax Agency (Agencia Tributaria). Correct classification is essential, as it affects both the taxes you must pay and the deductions you may claim.

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1. Holiday Rentals With Hospitality or Additional Services

This type of rental includes services similar to those provided by hotels, such as:

• Guest check-in and reception
• Cleaning during the stay
• Laundry services
• Luggage storage
• Food or catering services
• Organised leisure or recreational activities

When these services are offered, the Tax Agency considers the activity a business activity, not just property rental.

Taxes You Must Pay for Holiday Rentals with Services

Impuesto de Actividades Económicas (IAE)

• Only due if your annual revenue exceeds €1 million.
• Registration under IAE code 685 (non-hotel tourist accommodation) is required.

Value Added Tax (VAT / IVA)

• These rentals are not exempt from VAT.
• They must apply the 10% reduced VAT rate, similar to hotel services (Art. 91 LIVA).

Personal Income Tax (IRPF)

• Income is declared as business activity income, as the rental includes complementary hospitality services.

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2. Holiday Rentals Without Hospitality or Additional Services

These properties only offer the basic services necessary for accommodation, such as:

• Cleaning and linen change at check-in/check-out
• Basic maintenance or repair services
• Cleaning of communal areas

In this case, income is treated as real estate capital income (rendimientos del capital inmobiliario), not as a business activity.

Taxes You Must Pay for Holiday Rentals Without Services

Impuesto de Actividades Económicas (IAE)

• Listed under IAE code 861.1 (residential rental).
• You may not need to register if the rental is VAT-exempt and does not constitute a business activity for IRPF.

Value Added Tax (IVA)

• These rentals are exempt from VAT, as they do not provide hotel-type services.

Personal Income Tax (IRPF)

• Income is treated as real estate capital income.
• You must also declare imputed income for the days the property was not rented (1–2.2% of cadastral value).
• Exception: If you hire a full-time employee to manage the rental, the income becomes business activity income.

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Deductible Expenses for Holiday Rentals

Like any economic activity, tourist rentals allow you to deduct a wide range of expenses on your income tax return. Whether or not you provide additional hospitality services, you may deduct costs related to the operation and maintenance of the property, including:

• ✔ Maintenance and repair costsPainting, plumbing, electrical repairs, appliance repairs, etc
  ‍✔ Insurance premiumsHome insurance, liability insurance, and other relevant policies.
  ‍✔ Taxes and municipal fees
  • IBI
  • Garbage collection fees
  • Community charges
  ✔ Loan interest and property depreciationDepreciation applies to both the building and the furniture/equipment.
  ‍✔ Advertising and promotionListings, paid ads, platform promotion fees.
  ‍✔ Management and administration costsAgency fees, property management software (including Polaroo), accountant fees, etc.
  ‍✔ Utilities (electricity, water, gas, internet)These are necessary for holiday rentals — and fully or partially deductible, depending on your case.

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How Utility Costs Are Deducted for Holiday Rentals

‍If you are an individual (persona física)

You may deduct utility expenses proportionally based on the number of days the property was rented.

👉 Formula:
Annual utility cost ÷ 365 × days rented

Only if the property was rented 100% of the year may you deduct the full amount.

If you are a company (persona jurídica)

Utilities may be deducted 100%, regardless of occupancy level.

Remember: deductible expenses cannot exceed gross rental income. Any excess can be carried forward for up to four years.

Because regulations may change, and certain deductions come with restrictions, consulting a tax advisor is strongly recommended.

Special case: Internet service

Internet can generally be fully deducted, as it is required regardless of the number of guests.

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‍Example: How to Calculate Deductible Utility Expenses

To calculate the exact deductible amount, divide the annual cost of each utility by 365 days, then multiply by the number of days the property was rented.

Let’s say:

• Rental days in the year: 215
• Annual electricity cost: €2,000

Calculation:
€2,000 ÷ 365 × 215 = €1,178.08 deductible

The same proportional method applies to other deductible management tools such as Polaroo.

Remember: deductible expenses cannot exceed your gross rental income. If they do, the excess may be carried forward for up to 4 years.

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Optimize Your Holiday Rental Costs With Polaroo

Managing invoices, collecting documents for your tax return, and keeping control of your utility expenses can be time-consuming. At Polaroo, we make it simple:

✔ Lower utility costs across your holiday rental properties

We proactively optimize your electricity, gas, water, and internet contracts reaching for the best prices according to your real consumption needs.

✔ We collect and organize all invoices for you

Receive everything neatly organized by email — ready for your next tax return.

✔ Smart reports available in 2 clicks

Access personalized breakdowns and consumption analyses instantly.

✔ Dedicated Account Manager

Ask questions, request contract changes, or get support whenever you need it.

Discover how Polaroo helps holiday rental businesses grow while saving time and money with our Utility Management Solutions for Vacation Rentals.

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To learn more, visit our page on holiday rental utility management and discover how we’ve helped other tourism businesses grow efficiently.