Balearics obliged by Madrid to charge VAT on tourist tax

Biel Barceló, the tourism minister, has confirmed that there is a requirement to apply IVA (which in this instance is the 10% reduced rate, sometimes called the tourist rate as it applies to, for example, hotels and restaurants). He says that it "makes no sense" for a tax raised by an autonomous community to be subject to a national tax. "But that's how it is, however illogical it might be. We don't believe it will have any impact, as we're talking cents in each case. It's the same in Catalonia and it hasn't been an issue there."

Barceló is stressing that the IVA is an administrative matter of national government. Were it down to the regional government, then it would not be applied. But Palma has no choice but to comply with Madrid's requirements. As far as the revenue that is raised by the IVA is concerned, only a proportion of it (typically 33%) will become Balearic revenue. The rest will go to the national government.

The announcement of the IVA charge didn't come as any real surprise, as the prospect of it being added had been mentioned when the Balearic tourist tax was first being proposed by the government. It had been mentioned precisely because of the situation in Catalonia. Nevertheless, the government had remained silent on the matter, never having referred to what was more than just a likelihood that IVA would have to be applied. It was always going to be an obligation, as the Catalonia tax had set the precedent.

Interestingly, the relevant article of the 1992 law was updated in March 2012 by the national government, which just so happened to coincide with the approval of the tourist tax by the Catalonian parliament. Also of interest is the fact elsewhere in Europe VAT is not charged on taxes for tourist stays (which is the official term given to both the Catalonian and Balearic taxes).