Buy a new build and recover 100% of the VAT by registering the property for a VAT-eligible rental or business activity for 10 years. Did you know that when you buy a new-build property in Spain, you can reclaim 100% of the VAT (IVA) paid on the purchase price?
For many foreign buyers, this means an immediate saving of 10% on residential properties (or 21% for commercial units). However, this VAT refund comes with an important condition:
To keep the benefit, the property must be used for a VAT-registered business activity — such as short-term holiday rentals — for at least ten years. During that period, you’ll charge VAT on your rental income and declare it to the Spanish tax authorities, just as a Spanish business would.
For EU-based investors, this creates an attractive opportunity: significant upfront savings combined with an income-generating asset in one of Europe’s most dynamic property markets.
Before 2023, foreign buyers without a permanent establishment in Spain couldn’t directly handle VAT. The tax was accounted for by the seller under the “reverse charge” mechanism.
Since the 2023 reform of Article 84 of the Spanish VAT Law, this has changed.
Now, both companies and individuals who carry out an activity subject to VAT — like tourist rentals or commercial leasing — can register for VAT in Spain, reclaim VAT on their purchase, and operate fully within the Spanish tax system.
In short: as long as you rent out your property as a VAT-registered business, you can claim back 100% of the VAT on your new-build purchase.
To qualify for a VAT refund:
• Register for VAT in Spain — obtain a Spanish tax identification number (NIF) and register with the Tax Agency (AEAT).
• Use the property for a taxable business activity, meaning you issue invoices that include VAT.
• Declare the intended business use of the property when you purchase it.
Once registered, you’ll submit quarterly VAT returns in Spain, just like any local business.
Case 1: Tourist Rental with Hospitality Services (10% VAT)
• Your company rents the property directly to guests and provides services like cleaning, linen changes, or reception.
• You charge guests 10% VAT.
• You can reclaim 100% of the VAT paid on the purchase.
Case 2: Commercial Use or Office Rental (21% VAT)
You rent the property as a professional space — for example, to a law firm or medical practice.
• You charge 21% VAT.
• You can reclaim the VAT in full.
Case 3: Leasing to Another Company for Rental Management (21% VAT)
You rent the property to a property management or tour operator company.
• You invoice that company with 21% VAT.
• You may reclaim all VAT paid on the purchase.
In every scenario, you must be properly registered for VAT and declare the business purpose of the property from the moment of purchase.
• A Dutch entrepreneur buys a new-build apartment in the Costa Blanca through his company for €350,000, paying €35,000 in VAT.
• He rents the property as a holiday apartment with hospitality services (subject to 10% VAT).
• Annual rental income: €13,200 (€1,100/month).
• VAT charged to guests: €1,200/year.
• Over 10 years: €12,000 in VAT paid to the Spanish Tax Office.
Result: €35,000 VAT reclaimed on purchase – €12,000 VAT paid over ten years = €23,000 net saving.
However, if the property stops being rented or is used privately within those 10 years, a proportion of the refunded VAT must be repaid.
• The refund is requested in your fourth-quarter VAT return (by 30 January of the following year).
• The Spanish Tax Agency reviews all refund claims carefully, especially property-related ones.
• Refunds can take up to six months and may trigger a review or inspection.
• You must have issued VAT invoices during that year to apply for the refund.
Once your VAT refund is approved, you must:
• Maintain the same taxable use of the property for 10 years.
• File quarterly VAT returns and issue compliant invoices.
• Keep invoices and records for at least four years.
• Apply a pro-rata adjustment if part of your income is VAT-exempt.
• For companies: if directors or family members use the property, a taxable rental value must be declared.
The VAT refund can offer major upfront savings, but it also brings long-term obligations. Consider:
• Administrative and accounting costs.
• VAT payments on your rental income over time.
• The requirement to maintain business use for 10 years.
In low-yield scenarios (2–3%), the VAT refund often provides a real financial boost. In high-yield rentals (8–10%), the benefit may be smaller compared to the ongoing VAT payments — but still a worthwhile incentive to invest in new-build properties over resales, which don’t allow VAT recovery.
Under the EU’s new VAT in the Digital Age directive (effective July 2028), all short-term rentals of up to 30 nights will be treated as hotel-style accommodation and subject to VAT across the EU.
This means:
• All short-stay rentals will have to charge VAT (likely 10%).
• Owners will issue VAT invoices and file regular VAT returns.
• All documentation must be kept for at least four years.
Spain may even implement this reform earlier, which will make VAT registration — and therefore VAT recovery — standard for all short-term rental properties.
For EU-based buyers, purchasing a new-build property in Spain through a company or as a VAT-registered individual offers a unique tax advantage:
You can reclaim 100% of the VAT on the purchase and offset it through a legitimate rental business over the following 10 years.
With the right setup, this can mean tens of thousands of euros in savings — plus the benefit of a steady, VAT-compliant rental income.
At HomeEspaña, we help international buyers identify the most attractive new-build opportunities and connect them with trusted Spanish tax and legal professionals who can manage the VAT process efficiently and safely.
Buy new, buy smart — and make Spain’s VAT rules work in your favour.
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