Mallorca's restaurant and hotel groups reject EU push to more than double VAT
CAEB, the Mallorca Hotel Business Federation and CAEB Restauración Mallorca have rejected a European Commission recommendation to raise Spain's reduced hospitality VAT from 10% to 21%. The trade bodies warn the change would raise prices for locals and tourists alike and point to Portugal's reversed 2012 VAT hike as a cautionary precedent.
Mallorca's main hospitality associations have rejected a European Commission recommendation to raise Spain's reduced VAT rate on hotels and restaurants from 10% to the standard 21%, warning it would hit locals and tourists at the till and undercut the island's competitiveness against rivals like Greece, Italy, Croatia and Turkey.
The Confederation of Business Associations of the Balearics (CAEB), the Mallorca Hotel Business Federation (FEHM) and CAEB Restauración Mallorca all came out against the proposal in mid-July, according to Menorca.info. Brussels argues the reduced rate mostly benefits wealthier diners, who eat out more often than lower earners, and estimates the discount costs Spain around 7 billion euros a year in forgone tax revenue, according to DirectoalPaladar, which first reported the Commission's push in early June.
The Balearic associations counter that a jump to 21% would squeeze consumer spending in a sector that employs around 2.2 million people across Spain, and that international guests, who compare prices against competing destinations before booking, are especially price-sensitive. FEHM warned the change would raise the cost of everyday moments, a coffee, a restaurant meal, a family celebration, for residents too, not just visitors.
Both outlets point to Portugal as the cautionary tale. Lisbon raised restaurant VAT from 12% to 23% in 2012 under similar EU pressure. The result was a wave of closures and job losses, plus lower tax collection than the government expected, and Lisbon reversed the increase four years later. The European Commission's recommendation is non-binding and Spain has set no timeline for a decision, so it's worth checking back before assuming any change to menu prices is imminent.
Frequently asked questions
What VAT rate change is Brussels proposing for Spanish restaurants?
The European Commission wants Spain to raise its reduced 10% hospitality VAT rate to the standard 21% rate, arguing the discount mostly benefits wealthier diners and costs Spain around 7 billion euros a year in lost revenue.
Why are Mallorca's restaurant and hotel associations against the VAT hike?
CAEB, the Mallorca Hotel Business Federation and CAEB Restauración Mallorca say a jump to 21% would raise prices for locals and tourists, hurt competitiveness against destinations like Greece and Turkey, and point to Portugal's reversed 2012 VAT hike as a warning.