Spain’s General Directorate of Taxes (GDT) has clarified the concept of “construction work” in the context of the application of the VAT reverse charge and the Galicia region of the country has introduced a new tourist tax and municipal surcharge.
The GDT has issued a binding ruling that analyses the application of the VAT reverse charge in relation to an entity engaged in the installation of scaffolding, fences and nets in residential construction. The entity may be subcontracted by the main contractor or engaged directly by the developer. Although the GDT concluded that the reverse charge did not apply to the services provided in the case, the ruling offers useful guidance on activities that will be considered construction work for purposes of the reverse charge.
The following requirements must be met for the reverse charge to apply in Spain:
The ruling includes examples that illustrate what should and should not be regarded as construction work for purposes of applying the reverse charge, with the following activities being considered construction work:
While neither the Galician law nor the local ordinances expressly mention VAT, Spain’s VAT law requires that the taxable base include taxes and charges linked to the underlying service. Consequently, the municipal tourist surcharge—as an indirect tax— should be included in the VAT base, meaning hotels must charge VAT (generally 10%) on the tourist tax.
The Galician regime mirrors elements of the schemes in Catalonia and the Balearic Islands. In both regions, levies are applied per night and vary depending on the type of accommodation, with revenue earmarked for tourism sustainability projects.
The GDT’s ruling on construction work should provide affected parties with a clear roadmap of the requirements to be eligible for the VAT reverse charge.
With three regions now imposing tourist taxes, the trend toward broader adoption is strengthening. Other autonomous communities, particularly those with high tourism rates, may explore similar mechanisms, motivated by both fiscal needs and sustainable tourism policies. For the hotel sector, this means increasing complexity: different rates, exemptions, reporting rules, and — importantly — the obligation to charge VAT on the tourist tax itself. Multiregional operators should prepare for a scenario in which tourist taxes become the norm rather than the exception across Spain.
Alvaro Gomez-Elvira
Ignacio Porras
Andrés Díaz González
BDO in Spain
GDT Ruling on Construction Work
The GDT has issued a binding ruling that analyses the application of the VAT reverse charge in relation to an entity engaged in the installation of scaffolding, fences and nets in residential construction. The entity may be subcontracted by the main contractor or engaged directly by the developer. Although the GDT concluded that the reverse charge did not apply to the services provided in the case, the ruling offers useful guidance on activities that will be considered construction work for purposes of the reverse charge.The following requirements must be met for the reverse charge to apply in Spain:
- The work must relate to the development of land or the construction or refurbishment of buildings;
- The contract or subcontract must have the legal nature of a construction work contract, with or without the supply of materials, including the assignment of needed personnel;
- The recipient of the construction work must act in its capacity as a business or professional; and
- The transaction must result from a contract “directly formalised” between the developer and the main contractor(s). The term “directly formalised” must be understood being equivalent to a contract “directly entered into” between the developer and the contractor, regardless of whether the contract is oral or in writing.
The ruling includes examples that illustrate what should and should not be regarded as construction work for purposes of applying the reverse charge, with the following activities being considered construction work:
- Installation of plumbing, heating, electricity, etc., as well as the installation of kitchen and bathroom fixtures, including countertops of any material and built-in wardrobes.
- Supply of goods that need to be assembled and installed, such as doors, windows, elevators, heating, air conditioning, security and/or telecommunications equipment, as well as the pouring and spreading of concrete or other materials.
- Construction of water treatment and drinking water plants, photovoltaic solar facilities, railways, landscaping, etc.
- Earthmoving for the execution of any type of building construction or land development project.
- Demolition of buildings.
- Construction of roads and highways, including horizontal and vertical signage, the installation of metal fencing, guardrails, etc.
- Rental of cranes and other heavy machinery with specialised operators, as well as the rental of transport vehicles with or without drivers unless, under the relevant agreement, the service provider undertakes to carry out all or part of the work and assumes responsibility for the result;
- Maintenance operations of installations under any contractual form;
- Periodic maintenance of various installations, fixtures, etc. even where they involve the replacement or repair of defective or damaged materials;
- Road operation, maintenance and monitoring activities carried out under a conservation and maintenance contract, including removing objects from the road, repairing defects in the road, hazard signage, traffic signalling and regulation, inspection of road elements, patching and levelling of pavements, minor repairs of structures, cleaning of drains, joints, signs, etc.;
- Security and surveillance services at the worksite, site management, drafting of projects, and services of architects, engineers or technical assistance in site safety;
- Waste management;
- Supply and installation of equipment that does not form part of the actual construction activities, such as site huts, protective elements or scaffolding; and
- Supply of materials not subject to installation and assembly.
Tourist Tax and Municipal Surcharge in Galicia
The Galicia region of Spain has joined Catalonia and the Balearic Islands in imposing a tourist tax and municipal surcharge, marking a potential shift towards wider adoption of such charges throughout the country. Law 5/2024 of 27 December 2024 created the Galician Tax on Tourist Stays as an indirect tax and authorised an optional municipal surcharge. The first municipalities to implement the system are A Coruña and Santiago de Compostela on 29 September 2025 and 1 October 2025, respectively.
How the System Works
- Regional tax: The Galician government established an indirect tax on overnight stays in regulated accommodation. Currently, this levy is fully relieved by the regional authorities, so no direct cost or tax obligations arise from the regional law.
- Municipal surcharge: Councils are authorised to impose a surcharge of up to 100% of the regional tax. In practice, this is the only amount collected from tourists since the regional charge remains subject to relief.
While neither the Galician law nor the local ordinances expressly mention VAT, Spain’s VAT law requires that the taxable base include taxes and charges linked to the underlying service. Consequently, the municipal tourist surcharge—as an indirect tax— should be included in the VAT base, meaning hotels must charge VAT (generally 10%) on the tourist tax.
The Galician regime mirrors elements of the schemes in Catalonia and the Balearic Islands. In both regions, levies are applied per night and vary depending on the type of accommodation, with revenue earmarked for tourism sustainability projects.
BDO Insight
The GDT’s ruling on construction work should provide affected parties with a clear roadmap of the requirements to be eligible for the VAT reverse charge.With three regions now imposing tourist taxes, the trend toward broader adoption is strengthening. Other autonomous communities, particularly those with high tourism rates, may explore similar mechanisms, motivated by both fiscal needs and sustainable tourism policies. For the hotel sector, this means increasing complexity: different rates, exemptions, reporting rules, and — importantly — the obligation to charge VAT on the tourist tax itself. Multiregional operators should prepare for a scenario in which tourist taxes become the norm rather than the exception across Spain.
Alvaro Gomez-Elvira
Ignacio Porras
Andrés Díaz González
BDO in Spain