Tourist flats: Government considers taxing them as a business

Government considers treating tourist flats as a business

Tourist flats are in the tax authorities' sights. The Executive has hinted that they will no longer be declared as just another rental and will instead be taxed as an economic activity: registration as self-employed, quarterly VAT returns and a profit-and-loss account. The fine print does not exist yet. The Government itself 'will think about it', and any bill will have to go through a Congress where support can be counted on the fingers of one hand.

The reception has been a train crash. For some, it is the umpteenth promise with no law behind it, a sibling of the 180,000 homes announced and never built. For others, it is simple justice: if you compete with a hotel, you should be taxed like a hotel. And in between, hundreds of thousands of owners looking at their tax returns.

What changes if tourist rentals are considered an economic activity

Today, the owner of a tourist flat adds their income to their general taxable base. That means taxing it at the marginal personal income tax rate, the highest in the scale. The most repeated example in the calculations going around: a flat that brings in 20,000 euros net a year is added to a salary of 40,000 and raises the base to 60,000, with an effective rate of 37% on the property.

If the activity is channelled through a company, the rate falls. Corporate tax stays at 25%. On paper, the saving is notable. In practice, you have the self-employed contribution, quarterly VAT returns, an accountant and proper bookkeeping. The full breakdown, item by item, is what turns the theoretical reduction into something rather less brilliant.

Some argue that the reform will end up being a gift to investors with a corporate structure and a headache for an individual with a single flat. The profitability range being discussed —around 8% at best— leaves little room to add fixed costs.

The Supreme Court has already said it is not always an economic activity

Here is the legal knot. The regulations governing these rentals have been in force for decades, and the Supreme Court has held that letting a property does not constitute an economic activity when hotel-type services are not provided: daily cleaning, breakfast, reception. Without those services, the rental has historically been considered capital income, not a business. Changing that criterion through legislation, without touching anything else, is what many see as a patch.

On fraud, there are conflicting versions. One current argues that collecting without declaring is now almost impossible: without bookings on platforms, the business collapses. And it offers an uncomfortable figure: the Tax Agency would already take in more than 600 euros a month for each holiday rental flat, through the marginal income tax route. Another responds that this figure is not verified and that owners declare what they want.

Hoteliers, the lobby that makes and unmakes governments

On paper, the measure hits the big beneficiary of the lack of regulation: the hotel sector, which for years has coexisted with competitors without its costs. The paradox is that it is also its main driving force. In the Valencian Community, the regional minister of Industry and Tourism took office after running the provincial hotel association, Hosbec, until the regional president dismissed her. The summary that keeps being repeated is hard to refute: hoteliers do not merely influence the government, they are the government. And meanwhile, rooms at 200 euros a night.

Housing, neighbours and the landlord's legal certainty

The backdrop is housing, and there the diagnosis splits. One dominant thesis holds that the tourist flat is not the main cause of the price, but the perfect alibi: the real problem would be the landlord's legal uncertainty in the face of non-payment, which keeps thousands of flats out of long-term rental. Providing guarantees, and not raising taxes, would ease prices.

The other half of the issue is coexistence. Blocks with tourist-use homes put up with different neighbours every week, with the wear and tear that means for the community and for those who live there all year round. The solution that keeps coming up: a whole building or a ground-floor unit with its own entrance, never a loose fourth-floor flat in a residential building.

And empty flats? No one has yet explained what is gained by banning short-term rentals if they can be left closed. In the same bag are permanently protected public housing and curbs on purchases by funds and non-residents.

With the Supreme Court holding one view, the Government pointing to another and the Tax Agency already collecting via the marginal rate, the exact point where the analysis gets stuck is the simplest of all: how much is really collected today and who actually benefits from the change.