Agritourism Taxation: How B&B Income is Taxed in Spain (VAT & Personal/Corporate Tax)
Introduction
Transforming an authentic Spanish country estate (finca) into a charming B&B (or "Casa Rural" - rural guesthouse) is a dream for many investors. However, this agritourism project requires careful consideration. Launching a B&B activity in Spain is not a simple rental; it's the creation of a hospitality services business, and the resulting taxation is radically different from that of a classic seasonal rental.
As experts in complex real estate transactions and investment, we must emphasize a crucial point: your income will be subject to a specific Value Added Tax (IVA/VAT) regime, and your profits will be taxed either under personal income tax (IRPF) or corporate tax (IS). Understanding this structure is key to ensuring the profitability and legality of your project. This guide details the essential tax obligations you must master.
1. Legal Classification: The Agritourism License
Before even discussing taxes, the first step is legal. A B&B or "Casa Rural" is not a "vivienda de uso turístico" (tourist dwelling), which is akin to a simple Airbnb. It is a "alojamiento turístico rural" (rural tourist accommodation), which is a business classification.
To operate, you must obtain a specific tourism license from your "Comunidad Autónoma" (Autonomous Community). Obtaining this license automatically classifies you in the eyes of the Spanish tax authorities (Hacienda) as engaging in an "actividad económica" (economic activity). You will therefore need to register as a "autónomo" (self-employed individual) or create a limited company (S.L.). This classification governs your entire tax situation.
2. VAT (IVA): The Reduced Hospitality Rate (10%)
This is the most common confusion. Residential rentals or simple tourist rentals (without services) are exempt from VAT. However, a B&B is not a simple rental.
The "Hospitality Services" Rule
Because your B&B provides (or is intended to provide) hospitality services, it is subject to the hospitality VAT regime. The applicable rate is not the general rate of 21%, but the reduced rate of 10%. You must therefore charge 10% VAT on all your overnight stays and ancillary services (such as breakfast).
- Reception and customer service (check-in/check-out).
- Regular cleaning of rooms and common areas (during the guest's stay).
- Linen and towel changes.
- Provision of catering services (e.g., breakfast).
| Activity Type | Services Provided (Key Criterion) | Applicable VAT (IVA) Rate |
|---|---|---|
| B&B / Agritourism (Casa Rural) | Yes (Hospitality: cleaning, breakfast, reception) | 10% (Reduced rate) |
| Tourist Rental (VUT / Airbnb) | No (Only check-in/check-out cleaning) | 0% (Exempt) |
| Long-Term Rental (Vivienda) | No (Residential use) | 0% (Exempt) |
3. Profit Taxation: Personal Income Tax (IRPF) vs. Corporate Tax (IS)
Once VAT has been collected and declared (quarterly), you must pay tax on your net profits (Profit = Income - Deductible Expenses). You have two main options:
Option 1: Personal Income Tax (IRPF)
If you operate as a self-employed individual (autónomo), the net profit from your B&B is considered "rendimientos de actividades económicas" (income from economic activities). This amount is added to your other income (salaries, pensions...) and is subject to the progressive IRPF scale, which can go up to over 47% depending on the region.
Option 2: Corporate Tax (IS - S.L.)
For larger projects, it is often more tax-efficient to create a limited company (Sociedad Limitada - S.L.). The company pays Corporate Tax (IS) on its profits at the general rate of 25% (or a reduced rate of 15% for new companies in their first two years of profit). You then only pay IRPF on the salary ("nómina") or dividends that you decide to pay yourself.
Important Tax Advisory
Our expertise shows that the choice between Personal Income Tax (IRPF) and Corporate Tax (IS) is crucial and depends on your total income. If the B&B's profit, added to your other income, places you in an IRPF bracket exceeding 25%, creating a limited company (S.L.) becomes a serious option to explore with a "gestor" (accountant/tax advisor).
4. The Key: Deductible Expenses (Gastos Deducibles)
Your tax is calculated on net profit. Therefore, legally maximizing your deductible expenses is the number one tax strategy. This is also where Hacienda (the Spanish tax authorities) conducts the most audits.
The major challenge is that you often live on-site. Expenses must be scrupulously separated ("prorrateadas" - prorated) between your private use and professional use, generally in proportion to the square meters dedicated to the activity.
| Expense Type | Deductibility (Key Rule) |
|---|---|
| Purchases (Breakfast food, welcome amenities) | 100% (Direct expense) |
| Commissions (Booking.com, Airbnb, etc.) | 100% (Direct expense) |
| Gestoría Fees (Accountant) | 100% (Direct expense) |
| Utilities (Water, Electricity, Internet) | Pro-rated (based on m² allocated to the activity) |
| IBI (Property Tax), Home Insurance | Pro-rated (based on m² allocated to the activity) |
| Amortization of the property | Pro-rated (Construction part, excluding land) |
| Renovations (B&B portion) | Amortizable over several years |
Official Resource
The taxation of "actividades económicas" (economic activities) is complex. Our duty is to refer you to official information. You can consult the practical manual of Personal Income Tax (IRPF) published by the Spanish Tax Agency (AEAT), particularly the chapter on economic activities.
Conclusion
Launching a B&B or agritourism project in Spain is an exciting entrepreneurial adventure, but it is a guaranteed financial failure without expert tax structuring. Remember these three points: you are engaging in an economic activity (not a rental), you must charge 10% VAT (IVA) on your hospitality services, and your profits will be heavily taxed (Personal Income Tax (IRPF) or Corporate Tax (IS)) if you do not perfectly master your deductible expenses.
This project demands absolute confidence in your advisors. Trying to manage this taxation alone is the biggest risk you can take. Assistance from a "gestor" (accountant/tax advisor) specializing in rural tourism from the initial purchase phase of the country estate is not an option; it is an obligation for the success of your investment.
Your B&B Project in Spain
Take advantage of market opportunities. Let's discuss your project.
Article Summary
- Introduction
- 1. Legal Classification: The Agritourism License
- 2. VAT (IVA): The Reduced Hospitality Rate (10%)
- The "Hospitality Services" Rule
- 3. Profit Taxation: Personal Income Tax (IRPF) vs. Corporate Tax (IS)
- Option 1: Personal Income Tax (IRPF)
- Option 2: Corporate Tax (IS - S.L.)
- 4. The Key: Deductible Expenses (Gastos Deducibles)
- Conclusion
FAQ : Taxation and Investment in Spanish 'Casa Rural' Properties
Investing in a Spanish rural property ('finca') for agritourism presents a unique opportunity. Understanding the specific taxation of 'Casa Rural' properties is crucial for the success of your project.
A Casa Rural is a rural property converted into tourist accommodation, often a former finca. It is distinguished by the provision of hotel-like services (breakfast, daily cleaning, etc.), which classifies it as an economic activity rather than a simple residential rental.
The taxation of a 'Casa Rural' is fundamentally different because it is considered the establishment of a hotel services business. Unlike a standard short-term rental, which is generally exempt from VAT, a 'Casa Rural' is subject to VAT (IVA) and its profits are taxed under an economic activity regime (IRPF or IS), which implies specific tax obligations and advantages.
The first and most crucial legal step is obtaining a specific tourism license. This license is issued by the Comunidad Autónoma (Autonomous Community) where the property is located. This authorisation is mandatory before any commercial operation and determines the tax classification of your activity.
The distinction is fundamental: a Casa Rural is an 'alojamiento turístico rural' (rural tourist accommodation), classified as a business offering hotel-like services. A vivienda de uso turístico (VUT), on the other hand, is similar to a holiday rental without additional services. This difference in legal classification directly impacts the applicable tax regime.
Yes, the operation of a 'Casa Rural' is automatically classified as an 'actividad económica' (economic activity) by the Spanish tax authority (Hacienda). This classification is triggered by obtaining the tourism license and implies specific tax and accounting obligations, far more complex than for a simple rental.
You have two main options:
- Register as an autónomo (self-employed individual). Your profits will then be subject to IRPF (Spanish Personal Income Tax).
- Create a company, generally a Sociedad Limitada (S.L.), a limited company. In this case, the profits from the activity will be subject to IS (Spanish Corporate Income Tax).
The choice depends on the scale of your project and your personal tax situation.
Yes, a 'Casa Rural' is subject to VAT (IVA - Value Added Tax). It's a common mistake to think otherwise, as residential or tourist rental without services is exempt. However, the hotel-like services offered by a 'Casa Rural' make it obligatorily subject to IVA.
The VAT rate applicable to 'Casa Rural' services is not the general rate of 21%. It is the reduced rate of 10%, specific to the hospitality and tourism sector in Spain. You will therefore need to charge 10% IVA on all overnight stays and ancillary services you offer.
The services that trigger VAT liability are those falling under servicios de hostelería (hospitality services). These include, but are not limited to:
- Reception and customer service (check-in/check-out).
- Regular cleaning of the room and common areas (during the client's stay).
- Change of bed linen and towels.
- Provision of catering services, such as breakfast.
The mere provision of the property is not enough to avoid IVA if these services are offered or implied.
The comparison is essential to understand the tax difference:
| Activity Type | Services Provided (Key Criterion) | Applicable IVA Rate |
|---|---|---|
| B&B / Agritourism (Casa Rural) | Yes (Hospitality: cleaning, breakfast, reception) | 10% (Reduced Rate) |
| Tourist Rental (VUT / Airbnb) | No (Only check-in/check-out cleaning) | 0% (Exempt) |
| Long-Term Rental ('Vivienda') | No (Residential Use) | 0% (Exempt) |
Once IVA is collected and declared, the net profits (income minus deductible expenses) of your 'Casa Rural' are taxed under two main regimes: IRPF (Spanish Personal Income Tax) if you are a self-employed individual (autónomo), or IS (Spanish Corporate Income Tax) if you have created a company (S.L.).
IRPF (Spanish Personal Income Tax) is the tax individuals pay on their total income. If you operate your 'Casa Rural' as an autónomo, the net profit from your activity is considered rendimientos de actividades económicas (income from economic activities). This amount is added to your other personal income and is subject to the progressive IRPF scale, which can reach high rates (often over 47% depending on the region and income level).
Creating a Sociedad Limitada (S.L.) can be tax-advantageous, especially for projects generating significant profits. The company pays Corporate Income Tax (IS) on its profits at a general rate of 25% (or 15% for new companies during their first two years of profit-making). As a shareholder, you would then only pay IRPF on the salary or dividends you decide to pay yourself, which can help optimise the overall tax burden. This option is a strategic decision that requires expert advice.
Maximising deductible expenses is a key tax strategy to reduce your taxable profits. Here are some examples:
- Direct purchases for the activity (food for breakfast, welcome amenities).
- Commissions paid to booking platforms (Booking.com, Airbnb).
- Gestoría fees (accountant or tax advisor).
- A portion of the utility costs (water, electricity, internet) proportionate to professional use.
- A portion of the IBI (local property tax) and home insurance, also pro-rata.
- Depreciation of the property (construction part, excluding land) and renovations dedicated to the activity, spread over several years.
This is a frequent scrutiny point by the tax authority (Hacienda). You must rigorously separate expenses ('prorrateadas' - pro-rated) between your private use and the professional use of the 'Casa Rural'. Generally, this is done pro-rata based on square meters exclusively dedicated to the activity or, for certain charges, pro-rata based on professional use time. Rigorous record-keeping is imperative to prove the legitimacy of deductions.
