Royal Decree-Law 29/2026, of 6 October, introduces a comprehensive package of housing-related tax measures aimed at strengthening incentives for affordable rental housing and implementing changes to Personal Income Tax (IRPF), Value Added Tax (VAT), Property Tax (IBI) and Spanish Listed Real Estate Investment Companies (SOCIMIs). The aim is to encourage the supply of properties for long-term, affordable rental, bring vacant properties onto the market and facilitate the expansion of public housing stock. The implementation dates and transitional provisions are essential when assessing the impact of these measures.
An important point to clarify is what constitutes affordable rental housing. Article 3 of Law 12/2023, on the Right to Housing, establishes a general benchmark whereby housing costs, including basic expenses and utilities, should not exceed 30% of a household’s income. However, this criterion does not replace the specific requirements applicable to each tax benefit. Under Articles 6 and 9 of Royal Decree-Law 29/2026, a distinction must be made between incentivised affordable housing, which is subject to administrative benefits and restrictions, and Personal Income Tax provisions linked to the reference rental price system or rent reductions.
For landlords, the Personal Income Tax reform provides for tax reductions of up to 100%, linking tax benefits to factors such as rent reductions, tenant continuity, tenants’ ages and whether the property is located in a designated high-demand housing area. However, the new reductions do not apply indiscriminately to all rental agreements: the transitional provisions and the landlord’s status as a large property holder must be carefully reviewed.
For tenants, a new national Personal Income Tax deduction of 10% is introduced on amounts paid for the rental of their primary residence. This applies to taxpayers with a taxable income below €33,007.20, subject to decreasing deduction limits as income increases. Additional conditions also apply regarding ownership of other properties located nearby.
Regarding VAT, from 1 December 2026, rentals of furnished apartments or residential properties for periods of up to 30 nights to the same tenant will be subject to VAT at a rate of 10%, with a statutory exception relating to the landlord’s primary residence.
The application of the reduced VAT rate of 10% is also extended to certain renovation works carried out on properties intended for long-term residential rental, while the 4% rate is extended to the supply of certain permanently or indefinitely designated protected housing.
At the local level, municipal authorities may introduce Property Tax (IBI) surcharges on permanently vacant residential properties and tourist accommodation located in designated high-demand housing areas. In certain circumstances, these surcharges may reach 150% of the net tax liability. However, these surcharges are not automatic and require the approval of the corresponding municipal tax ordinance.
A temporary Personal Income Tax exemption is also introduced for the sale of certain vacant residential properties to public entities dedicated to social and affordable housing, subject to conditions relating to the sale price and other legal requirements.
The legislation also includes several additional changes worth noting. It modifies the maximum coefficients applicable to municipal capital gains tax on urban land from December onwards and expands the range of public financial assistance excluded from Personal Income Tax.
Furthermore, from 2027, a progressive scale for the imputation of real estate income will be introduced. The date of the property’s cadastral valuation review will no longer determine the applicable percentage. Instead, the percentage will be calculated according to a scale based on the relevant property values, regardless of whether the cadastral valuation has recently been revised. The cadastral value will nevertheless remain relevant when calculating imputed income.
Finally, the legislation establishes new savings instruments known as Financia Europa, offering tax deferral and other tax benefits.
In conclusion, before calculating any potential tax savings or additional costs arising from the reform, it is essential to verify the date of the rental agreement or transaction, the property’s circumstances, the taxpayer’s personal eligibility requirements and the applicable implementing regulations.
At Feliu, we can assess your individual circumstances and provide expert advice on how these changes may affect your real estate assets.
