The Spanish government has announced a tax reform that increases levies on vacant properties and significantly raises taxes on short-term holiday rentals. Among the key measures are the increase in VAT from 10% to 21% for holiday lets, and higher taxation on empty homes. The official aim is to curb the excessive use of properties for mass tourism and return more housing to the long-term rental market. At a regional level, the Balearic Islands — and Ibiza in particular — are enforcing even stricter regulations on tourist accommodation.

Key Taxes for Property Owners

• 21% VAT on Holiday Rentals: Tourist apartments will now be taxed at 21% VAT, the same rate applied to hotel services, rather than the previous 10%. This significantly reduces the net profit from short-term rentals.
• Higher Taxes on Vacant Properties: Personal Income Tax (IRPF) will rise for owners of vacant homes, to encourage them to place the property on the rental market. Currently, a deemed rental income of 1.1–2% of the cadastral value is imputed, but higher bands will soon apply. In addition, local councils will be authorised to raise council tax (IBI) on such properties.
• New Tax for Foreign Buyers: A supplementary charge is expected to be introduced on the purchase of property by non-residents (including non-EU nationals), aiming to reduce speculative investment in second homes.
• Increased Corporate Tax for Institutional Investors (SOCIMIs): Listed real estate investment trusts (SOCIMIs) will see their corporate tax rise from 15% to 25%, unless they allocate part of their housing stock to affordable rentals.
• Tax Relief for Affordable Housing Lettings: In return, tax deductions (up to 100%) will be extended in the IRPF to those letting below market rates in non-stressed areas.

Together, these measures mean that leaving a property empty or using it for tourist purposes will become increasingly costly. For example, an owner in Ibiza who does not rent out their flat must still declare a deemed income for tax purposes — and this amount may soon increase. For those letting to tourists, the VAT hike will reduce profit margins.

Restrictions in the Balearic Islands and Ibiza

Alongside national reforms, the Balearic government has tightened control over tourist rentals. A recent decree bans new holiday rental licences for flats in residential buildings across the entire archipelago. This means that new tourist apartments will no longer be authorised in multi-unit buildings, thereby enforcing a "zero growth" policy on holiday accommodation. In addition, the regional government now offers up to an 80% reduction on fines for owners who convert their holiday rentals into long-term tenancies.

Ibiza already enforces particularly strict rules. Since 2022, a moratorium on new tourist licences is in effect until 2026. If a licence is not used for three consecutive years, it automatically expires. Moreover, short-term holiday letting is strictly prohibited in apartment buildings throughout the island, except for rare cases such as designated rural homes. In practical terms, if your flat in Ibiza is part of a residential community, it cannot legally be rented out to tourists under current regulations. Fines for breaching these rules can exceed €400,000, adding significant risk to unauthorised tourist lettings.

What Does This Mean for You?

These new regulations are designed to penalise unused housing and to severely restrict holiday rentals. If you own a flat in Ibiza that has remained vacant, you may soon face increased taxation without generating any income. If you rent to tourists, you will earn less due to the VAT rise, and may even be forced to cease letting entirely in light of the new local prohibitions.

In response, many owners and investors are reconsidering their options. One alternative is to switch to long-term residential letting and take advantage of new tax incentives. However, if that model does not suit your needs, these developments may be a reason to consider selling your property now — before taxes rise further or the regulatory environment becomes more complex.

At CASAVIVA Inmobiliaria, we offer professional guidance to help you manage your property under these new rules. Whatever your decision, staying informed is essential: Spain’s 2025 tax and tourism regulations may have a significant impact on your property’s net value.