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V2655-18 2 October 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · exención de arrendamiento

Residential letting without hotel services is VAT exempt and taxed as investment income for Income Tax purposes

A property owner sought clarification regarding the taxation of a property intended for registration in the Tourism Register. The Directorate General for Taxes (DGT) ruled that, as no hotel industry services are provided, the rental is exempt from VAT and the income is classified as real estate investment income for Personal Income Tax (IRPF) purposes.

The question raised

Taxation regarding Value Added Tax, Economic Activities Tax, and Personal Income Tax.

The DGT's ruling

The leasing of residential property is exempt from VAT if it is intended exclusively for residential use and does not include hotel industry services (such as restaurant or periodic cleaning services). Cleaning services at the time of entry and exit are considered ancillary and maintain the exemption. For Personal Income Tax purposes, if no hotel services are provided and no person is employed on a full-time basis, the income constitutes income from real estate capital. For Economic Activities Tax purposes, the activity must be registered as non-hotel tourist accommodation.

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