Holiday Rental Tax in Lanzarote: The Complete Guide for Property Owners (2026)

The Basic Rule: All Rental Income from Spanish Property Is Taxable in Spain

It doesn't matter where you live. Whether you're based in London, Amsterdam, Berlin, or Dublin, if your Lanzarote property generates rental income, Spain has the legal right to tax that income.

This is governed by the Non-Resident Income Tax (IRNR — Impuesto sobre la Renta de No Residentes), and the filing is done through Modelo 210.

Key point: The Modelo 179 reporting obligation was abolished from the 2024 reporting year. In this area it was replaced by Modelo 238, through which in-scope platform operators report information to the Spanish Tax Agency (AEAT). This reporting obligation falls on the platform operator, but owners remain responsible for their own tax returns.

Your Tax Rate Depends on Where You Live

The rate you pay on Lanzarote rental income depends on your country of residence:

This difference is significant. A British owner earning €20,000 in annual rental income pays 24% on the full €20,000 (€4,800). A German owner earning the same amount can deduct eligible expenses first — reducing their taxable base considerably.

Important 2025 update: A July 2025 ruling by Spain's Audiencia Nacional found the 24% gross income treatment of non-EU residents potentially discriminatory under EU law. The case is under appeal, but if upheld, non-EU owners may be entitled to deduct expenses retroactively. Keep all your invoices for maintenance, management fees, cleaning, and repairs.

What Expenses Can EU Residents Deduct?

If you are an EU/EEA resident, you can deduct expenses proportional to the number of days the property was rented out. Common deductible expenses include:

• Property management fees (the agency taking a percentage of your rental income)
• Cleaning and laundry costs
• Repairs and maintenance (not capital improvements)
• IBI (local property tax / rates)
• Building insurance
• Mortgage interest on a loan used to purchase the property
• Depreciation — 3% of the acquisition cost of the building (excluding land value)
• Utilities (electricity, water, internet) if paid by the owner

The proportional calculation works like this: if your property was rented for 90 days out of 365, only 90/365 (24.7%) of annual costs are deductible.

The Canary Islands Difference: IGIC Instead of IVA

This is where Lanzarote rental owners frequently get caught out.

On the Spanish mainland, short-term holiday rentals involving hotel-like services (cleaning on departure, linen changes, etc.) are subject to IVA at 10%. In the Canary Islands, IVA does not apply. Instead, the local equivalent is IGIC (Impuesto General Indirecto Canario).

For holiday rentals in Lanzarote that include services:

• Standard IGIC rate: 7% (significantly lower than mainland IVA)
• You must register as a taxable person for IGIC purposes
• You must file quarterly IGIC returns (Modelo 420/421)
• You must include IGIC in your advertised prices or add it separately

If your rental is "passive" — that is, you simply let the property without providing any services, and a management agency handles everything — you may not need to charge IGIC. However, the line between "passive letting" and "service provision" is not always clear, and the AEAT is increasingly scrutinising this.

Modelo 210 Filing Options

For rental income accrued from 2024, an eligible taxpayer may opt to aggregate the year's income in one Modelo 210, provided the AEAT's grouping requirements are met. The alternative is to file a separate return for each accrual of income. The annual return is therefore an option, not a universal obligation. See the AEAT's rental-income examples.

Key dates:

Examples: If the annual grouping requirements are met and the taxpayer chooses that option, rental income accrued in 2025 was due by 20 January 2026; rental income accrued in 2026 will be due by 20 April 2027.

What if the property is empty for some months?

Even during periods when your property is not rented out and not in personal use, you still owe Spanish tax. This is called imputed income tax (renta imputada) and is based on 1.1% or 2% of your property's cadastral value (valor catastral), depending on when the cadastral value was last updated.

The resulting imputed income is then taxed at your applicable non-resident rate (19% or 24%).

The Tourist Licence: A Legal Requirement Before You Rent

You cannot legally rent your Lanzarote property to tourists without first obtaining a Tourist Rental Licence (Vivienda Vacacional). In the Canary Islands, this is regulated at the regional level.

Requirements include:

• The property must meet minimum habitability standards
• It must be registered with the Canary Islands Tourism Registry
• It must be assigned a registration number displayed on all platforms

Since 2024, there is also a new national requirement to register short-term rentals in the Registro Único (National Rental Registry) before listing on platforms like Airbnb or Booking.com.

Renting without a licence exposes you to fines from regional tourism authorities, which can be substantial — and platforms are now increasingly required to verify licence numbers before allowing listings.

The IBI and Basura: Annual Local Taxes

Regardless of whether you rent your property or not, as a property owner in Lanzarote you must pay two annual local taxes:

• IBI (Impuesto sobre Bienes Inmuebles): The equivalent of council tax in the UK. Based on the cadastral value of your property. Paid annually.
• Basura (waste collection tax): A contribution to local rubbish collection services.

These are billed by the local ayuntamiento (municipality — Arrecife, Tías, Yaiza, etc.) and are typically collected via direct debit if you have a Spanish bank account. Non-payment accumulates surcharges and can eventually lead to enforcement action.

Capital Gains Tax When You Sell

When you eventually sell your Lanzarote property, you will be subject to Capital Gains Tax (CGT) on any profit.

• Rate for non-residents: 19% on the gain (regardless of EU or non-EU status)
• At the point of sale: The buyer's solicitor typically withholds 3% of the sale price and pays it to the AEAT as an advance payment of your CGT
• After the sale, you (or your advisor) calculate the exact amount owed. If the 3% withholding exceeds your actual liability, you can claim a refund. If it falls short, you pay the balance.

The gain is calculated as: sale price minus purchase price, adjusted for documented improvement costs, purchase taxes paid, and selling costs (agent fees, legal fees, etc.).

Common Mistakes Made by Lanzarote Property Owners

1. Not filing at all The AEAT now receives rental data directly from Airbnb, Booking.com, and other platforms. Non-filers are increasingly identified and pursued.

2. Only filing for months the property was rented You must also file for periods when the property was vacant (imputed income). Many owners are surprised to receive tax demands years later.

3. Not registering for IGIC Owners providing even basic services (cleaning at changeover, fresh linen) may be required to register for and charge IGIC.

4. Missing the applicable deadline Under Article 27 of the General Tax Law, a voluntary late return filed without a prior tax authority requirement generally carries a surcharge of 1%, plus a further 1% for each complete month of delay. After 12 months, the surcharge is 15%, with late-payment interest running from the day after those 12 months until filing. These surcharges exclude penalties that might otherwise apply; where there has already been a formal requirement, or in other circumstances, a different interest and penalty regime may apply.

5. Assuming the management agency handles everything Property management companies handle bookings and maintenance. They do not file your Spanish tax returns. That remains your responsibility (or your tax advisor's).

How Accounting Spain Helps Holiday Rental Owners

We specialise in the full fiscal management of holiday rental properties in the Canary Islands, for owners based anywhere in the world. Our services include:

• Modelo 210 preparation and filing — annual aggregation where eligible and chosen, or separate returns
• IGIC registration and quarterly returns — where applicable
• IBI and basura monitoring — ensuring local taxes are paid on time
• Tourist licence guidance — connecting you with the right regional process
• Capital gains calculation and filing — when you sell
• Retroactive regularisation — if you haven't been filing and need to catch up

All services are delivered in English, 100% online. No need to visit an office in Lanzarote or Spain.

Frequently Asked Questions

This article is for general informational purposes only and does not constitute personalised tax or legal advice. Tax rules change frequently. Always consult a qualified advisor for your specific situation.