Economic Activities Tax

Article 78 of Royal Legislative Decree 2/2004, of March 5, which approves the revised text of the Law Regulating Local Finance (TRLRHL), defines the nature and taxable event of IAE , establishing that it is a direct tax of a real nature, the taxable event of which is constituted by the mere exercise, in national territory, of business, professional or artistic activities, whether or not they are carried out in a specific location and whether or not they are specified in the tax rates. For its part, article 79 TRLRHL regulates taxable economic activity, indicating that an activity is considered to be carried out on a business, professional or artistic basis when it involves the self-management of means of production and human resources or one of both, with the aim of participating in the production or distribution of goods or services.

Rule 2 of the Instruction for the application of the IAE Rates, both approved (Instruction and Rates) by Royal Legislative Decree 1175/1990, dated September 28, establishes that the mere exercise of any economic activity specified in the Rates, as well as the mere exercise of any other business, professional or artistic activity not specified therein, will give rise to the obligation to submit the corresponding registration declaration and to contribute for this tax, unless otherwise provided in this Instruction. Rule 4.1 of said Instruction provides that, in general, the payment corresponding to an activity authorizes, exclusively, the exercise of that activity, unless otherwise provided in the Law regulating this Tax, in the Tariffs or in this Instruction.

Below we analyse the different cases of the tourist apartment rental activity:

First of all , it is necessary to analyze the activity by which a person or entity transfers, in exchange for a price, to another person or entity, apartments for a certain period of time providing accommodation services . The activity of accommodation includes the provision of a series of services such as cleaning of properties, changing of linen, safekeeping of luggage, provision of dishes, utensils and kitchen appliances to the client, and sometimes, provision of food services. The IAE Rates classify in Group 68 of the first section, the “Hosting Service” . Within this Group, there is group 685 “Non-hotel tourist accommodation” , in which those activities that have the nature of lodging services will be classified, but which are provided in establishments other than hotels and motels, hostels and pensions, inns and guest houses, apartment hotels, organized companies or agencies operating private apartments, and camping-type tourist camps. In particular, the aforementioned group 685 includes accommodation services provided in rural estates, rural houses and inns in rural areas, as well as youth hostels, flats and similar establishments that do not objectively have the status of any of the establishments listed above.

Consequently, group 685 of the first section of the IAE Tariffs classifies the activity of operation of non-hotel tourist apartments ( DGT V0215-18, DGT V0731-17).

Secondly , we must consider the specific activity of renting tourist apartments, which basically consists of offering a temporary accommodation service for short stays, generally to tourists, for a period of less than a year, and which normally involves the provision of some service such as changing household goods, cleaning the property upon arrival and departure, etc.

This type of rental of housing for tourist or holiday purposes is classified in group "Non-hotel tourist accommodation" in the first section of the Tariffs, regardless of whether or not additional accommodation services are provided. That is to say, it is irrelevant whether customer service will extend beyond merely making the property available or providing occasional cleaning services, since the tourist purpose of the lease is clear and takes precedence over other types of considerations. (DGT V0068-23).

Once the activity has been classified, it is necessary to apply the exemption regime regulated in article c) TRLRHL, according to which resident individuals and taxpayers of Corporation Tax, civil companies and entities of article 35 .4 of Law 58/2003, of December 17, General Tax, with a net turnover of less than 1,000,000 euros, are exempt from ##2## IAE ##2##

This exemption implies that taxpayers do not have to register for the tax or pay taxes on it, but they are required to comply with the census obligations that may correspond to them by application of the provisions of Royal Decree 1065/2007, of July 27, which approves the General Regulation of the actions and procedures of tax management and inspection and the development of the common rules of the procedures for the application of taxes, which regulates the census obligations.