The Spanish autonomous city of Melilla, situated on the northern coast of Africa, is promoting its special tax regime to attract companies involved in iGaming and technology.
The benefit does not derive from looser gambling regulation. iGaming businesses are under the control of the Spanish government and the Directorate General for Gambling Regulation.
Patricia Lalanda, partner at Loyra Abogados, told SiGMA News:
A company established in Melilla operates under exactly the same regulatory framework as any operator based anywhere else in Spain. The Directorate General for the Regulation of Gambling (DGOJ) remains the competent authority for licensing, supervision and enforcement. Today, Melilla is no longer a concept or a policy initiative; it is an established business environment. International operators have successfully built operations there, technology companies have followed, and there is now enough practical experience for businesses to assess the model on the basis of real commercial outcomes rather than expectations.
Melilla’s offering lies in its special tax regime, whereby qualifying companies can pay taxes at a lower corporate rate of just 12.5% instead of paying taxes that can reach up to 50%. The gambling business is also taxed at 10% instead of 20% as the tax rate in Spain.
Another distinctive feature of the taxation system in Melilla is that it implements the IPSI instead of VAT, which is relevant for the provision of some services that fall within the iGaming domain, as it provides for a reduced rate of 0.5% as opposed to VAT.
In addition, there are workers tax incentives, as residents of Melilla pay taxes at a lower personal income tax rate of 60%.
Lalanda added:
Behind every licensed operator sits a much wider ecosystem of specialised businesses: platform developers, software providers, payment specialists, identity verification companies, cybersecurity firms, compliance consultancies, fraud prevention providers, CRM companies, data analytics businesses and digital marketing agencies.
In its early days, Melilla’s focus was largely on gambling operators but is now also seeking out suppliers and technology firms supplying the iGaming sector. This is because a lot of them do not need gaming licenses as they deal in technology and services rather than handle gambling products.
This shift is taking place against the backdrop of Spain revisiting its gambling legislation while the DGOJ is at work on reforming gambling laws from 2011.
Once again, Melilla’s ambition is more than just establishing itself as a gambling center. According to Lalanda, the know-how that comes in with the iGaming sector can also help with growing other technological industries, such as AI, cybersecurity, blockchain, cloud computing, digital identity and data analytics. She claims that online gambling can become a starting point of creating a wider digital economy, rather than the end goal of the city’s strategy.
This mirrors trends in a number of European gaming centers where suppliers are gaining importance, such as Malta where the gaming business is shifting towards B2B companies, which makes up a bigger share of licenses and applications.
Lalanda also highlighted the impact of the global minimum tax framework known as Pillar Two:
This is also why I believe Pillar Two is ultimately good news for Melilla: it means competition between jurisdictions is no longer a race to the bottom on nominal rates. Jurisdictions will increasingly have to compete on real substance, people, functions, infrastructure and genuine activity, and that is precisely the ground on which Melilla’s regime was built.
For Melilla, the opportunity is therefore not only about offering lower taxes. Its success depends on attracting companies willing to build real operations in the city, creating a foundation for a broader digital business ecosystem.
