Could VAT on Bars, Restaurants and Hotels Rise from 10% to 21%? What Brussels Asked and What Could Happen in Spain

A debate with major practical implications has resurfaced: whether Spain could review the reduced VAT rate currently applicable to hospitality, restaurants and certain hotel services. The discussion follows recommendations made by the European Commission to Spain in the 2026 European Semester, which highlight Spain’s extensive use of reduced VAT rates and other tax benefits.

First, an important clarification: no increase in VAT for bars, restaurants or hotels has been approved. Brussels has recommended reviewing certain tax benefits; no amendment to Spanish law is currently in force.

Current position: hospitality generally pays 10% VAT

Spain’s standard VAT rate is 21%, with reduced rates of 10% and 4% for specified supplies of goods and services. Under Article 91(One)(2)(2) of VAT Act 37/1992, hospitality, camping and spa services, restaurant services, and the supply of food and drink for immediate consumption generally qualify for the 10% rate.

As a result, most spending in bars, cafés and restaurants is currently taxed at 10%, not 21%. Certain accommodation and hospitality services may also qualify, although each service on an invoice must be assessed: ancillary services do not necessarily benefit from the reduced rate.

What Brussels has actually said

The European Commission has not ordered a direct increase in Spanish VAT and cannot amend Spain’s VAT Act on its own. It has recommended that Spain review or limit certain tax benefits to support the sustainability of public finances.

The Commission has drawn attention to reduced VAT rates and exemptions, which it considers costly in terms of foregone revenue and limited in their redistributive effect. In the hospitality and restaurant sector, some reports citing estimates by Spain’s Independent Authority for Fiscal Responsibility (AIReF) put the annual revenue impact of applying 10% instead of 21% at around €7 billion. The broader policy idea is that Spain could reduce tax expenditures, deductions and reduced rates as part of fiscal consolidation.

Could Spain raise hospitality VAT to 21%?

Legally, Spain could do so through the appropriate amendment to domestic law. EU VAT rules establish a framework: Member States must set a standard rate of at least 15% and may apply reduced rates to specified categories under the VAT Directive. EU law allows reduced rates but does not require Member States to retain a particular rate indefinitely.

So the fact that hospitality currently pays 10% does not mean Spain must preserve that rate forever. The Spanish legislature could decide that specified services should instead be taxed at the 21% standard rate. Whether that would be economically, socially or politically desirable is a separate question.

Practical effects of a rise from 10% to 21%

An increase would have consequences in three main areas:

• Consumer prices. Most private consumers cannot deduct VAT, so businesses may pass all or part of the increase on to customers.
• Business margins. If bars, restaurants or hotels absorb some of the increase rather than passing it on, their margins would fall. This could be difficult for smaller businesses already facing labour, rent, utility and food costs.
• Tourism and hospitality competitiveness. Price matters in many destinations, and hospitality and tourism carry substantial economic weight in Spain. Any change could have a significant sectoral and political impact.

A simple example

For a restaurant meal with a €50 taxable base:

• At 10% VAT: €5 VAT; total invoice €55.
• At 21% VAT: €10.50 VAT; total invoice €60.50.

The difference would be €5.50 on a €50 pre-tax bill. In hospitality, prices are often advertised VAT-inclusive—menus, coffees, breakfasts, bookings, menus and delivery-platform prices—so a rate increase might lead to a wider repricing rather than simply appearing as an extra line on the bill.

Is a change likely in the short term?

In the author’s view, a near-term increase would not be straightforward. It would carry a high political cost in a visible sector with a strong presence across the country; it could quickly raise prices for frequently purchased services; and consumption-tax increases can weigh particularly heavily on middle- and lower-income households.

That said, the Commission’s recommendation should not be dismissed as an isolated point. It forms part of a wider call for Spain to review tax benefits in order to strengthen public finances, and reduced VAT rates are among the areas under discussion.

Are reduced VAT rates fair?

The debate is about redistribution as well as revenue. Reduced rates lower prices for all consumers, including people who may not need tax support. If high- and low-income households consume the same service, the benefit is not necessarily concentrated on those most in need. Some policymakers therefore argue that it may be more efficient to collect more VAT and support vulnerable households through targeted transfers or public spending.

The difficulty is practical: a VAT increase is felt immediately, while compensation through public spending may be delayed, incomplete or poorly targeted.

The debate could extend beyond hospitality

The wider question is not limited to bars, restaurants and hotels. Spain applies reduced or super-reduced VAT rates to many areas, including food, transport, housing, culture, medicines, medical products, books and certain utilities. A comprehensive review of tax benefits could affect sectors beyond hospitality. Politically, however, sectors differ in sensitivity: changing VAT on tourist services is not the same as changing it on basic food or essential goods.

Conclusion

No increase from 10% to 21% for hospitality, restaurants or hotels has been approved. What exists is a European Commission recommendation that Spain review tax benefits and the use of reduced VAT rates, which it considers costly and limited in redistributive effect.

An increase would be legally possible, but politically complex and economically sensitive. It could affect consumer prices, business margins and spending in a major sector. The prudent conclusion is not that an increase is imminent, but that the debate is open and reduced VAT rates may feature in future tax reforms as Spain pursues fiscal consolidation.

Official references: Spanish VAT Act 37/1992 and EU VAT Directive 2006/112/EC.

Read the original article in Spanish.