The autonomous Spanish city of Melilla, located on Africa's northern coast, is actively promoting its special tax regime to attract iGaming and technology firms. This incentive does not stem from relaxed gambling regulations; in fact, iGaming operations in Melilla fall under the jurisdiction of Spain's Directorate General for Gambling Regulation (DGOJ). Patricia Lalanda, a partner at Loyra Abogados, stated, "A company established in Melilla operates under exactly the same regulatory framework as any operator based anywhere else in Spain." The DGOJ continues to oversee licensing, supervision, and enforcement for these businesses.
Melilla's competitive advantage lies in its favorable tax structure, where qualifying companies are taxed at a corporate rate of 12.5%, significantly lower than the maximum rates of up to 50% found in other parts of Spain. For the gambling sector, the tax rate is set at 10%, a reduction from the usual 20%.
Additionally, Melilla operates under the IPSI system rather than VAT, offering a markedly reduced rate of 0.5% on certain services within the iGaming industry. Workers in Melilla also benefit from lower personal income tax rates, set at 6%.
Lalanda pointed out, "Behind every licensed operator sits a much wider ecosystem of specialized 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."
Initially, Melilla concentrated its efforts on attracting gambling operators, but it has broadened its scope to include suppliers and technology firms that support the iGaming sector. Many of these firms do not require gaming licenses since they provide technology and services rather than direct gambling products.
This expansion comes as Spain reevaluates its gambling regulations, with the DGOJ working on reforms of the gambling laws established in 2011. However, Melilla’s ambition extends beyond being merely a gambling hub. Lalanda emphasizes that the expertise flowing in from the iGaming sector can foster growth in various technology industries, including AI, cybersecurity, blockchain, cloud computing, digital identity, and data analytics. She envisions online gambling as a potential launchpad for developing a broader digital economy within the city.
This aligns with trends seen in other European gaming hubs, such as Malta, where there is a noticeable shift toward B2B companies increasing their share of licenses and applications.
Lalanda also drew attention to the global minimum tax framework, Pillar Two, which she believes will favor Melilla. She remarked, "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."
Thus, Melilla's prospects hinge not solely on its lower tax rates but also on its ability to draw companies committed to establishing real operations, laying the groundwork for a more extensive digital business ecosystem.
