On 7 October, Royal Decree-Law 29/2026, of 6 October, was published in the Spanish Official State Gazette (BOE), introducing significant tax changes affecting the housing market. The legislation largely reinstates the tax measures previously included in Royal Decree-Law 26/2026.
Below is a summary of the main changes affecting property owners, tenants and businesses operating in the real estate sector.
1. Personal Income Tax (IRPF): Changes Affecting Landlords and Tenants
New Tax Reductions for Landlords
The rules governing reductions in positive net rental income from properties let as permanent residences have been amended.
The reductions will range from 15% to 100%, depending on factors such as changes in rent compared with the previous tenancy agreement, whether the property is located in a designated high-pressure housing area, the tenant’s age or whether the property is used for social housing.
The new rules particularly encourage reductions in rental prices and restrict tax relief where rents increase. Short-term and seasonal lettings are generally excluded from these reductions.
New Tax Deduction for Tenants
A new 10% national income tax deduction is introduced for amounts paid towards the rental of a main residence, available to taxpayers whose taxable income is below €33,007.20.
The maximum deduction base is €11,630, which is progressively reduced depending on the taxpayer’s income.
Higher Taxation of Properties Not Let Out
From 1 January 2027, imputed income from properties not let out will be calculated using a progressive scale based on the aggregate cadastral values of the relevant properties, with rates of 1.1%, 1.5%, 2% and 3%.
This change could significantly increase the tax burden for taxpayers owning several properties that are not rented out.
2. VAT: Taxation of Short-Term Residential Lettings
From 1 December 2026, the letting of furnished houses or apartments for periods of up to 30 nights to the same tenant will be subject to 10% VAT, even where no hotel-type services are provided.
The measure applies to both individual and corporate landlords, with an exception for lettings involving the landlord’s own main residence.
3. VAT: Extension of the Reduced Rate to Residential Renovation Works
The application of the 10% reduced VAT rate is extended to certain renovation and repair works carried out on properties intended to be let as tenants’ main residences, including where the property owner is a company.
The main requirements include a minimum period of two years since the property’s construction or refurbishment, materials supplied by the contractor not exceeding 40% of the taxable amount, and payment being made through permitted banking methods.
4. Property Tax (IBI): New Surcharges on Vacant Properties and Tourist Accommodation
Municipal surcharges on permanently vacant residential properties are strengthened, and local authorities are given the possibility of introducing specific surcharges on tourist accommodation in designated high-pressure housing areas.
In certain circumstances, these surcharges may reach 150% of the net property tax liability.
5. Municipal Capital Gains Tax: Updated Coefficients
The maximum coefficients used to calculate the taxable base of the Tax on the Increase in Value of Urban Land (IIVTNU), commonly known as municipal capital gains tax (plusvalía municipal), are amended with effect from 1 December 2026.
The new coefficients vary according to the period over which the increase in value has accrued and may therefore affect the taxation of urban property transfers.
6. Other Tax Measures
The legislation also introduces a special 25% tax on certain undistributed profits of Spanish REITs (SOCIMIs), together with incentives for affordable housing, tax relief for certain transfers of residential properties to public authorities, and new tax measures relating to savings and investment.
In summary, Royal Decree-Law 29/2026 introduces significant changes to property taxation, combining incentives for affordable residential lettings with increased taxation of certain forms of property ownership and exploitation.
The application of these measures requires an assessment of the specific circumstances of each property, tenancy agreement and taxpayer, as well as the relevant effective dates and transitional provisions.
Source: Royal Decree-Law 29/2026, of 6 October (Spanish Official State Gazette, 7 October 2026).