This Ceuta and Melilla tax guide covers the rules in force for the 2026 tax year. Spain’s two North African autonomous cities sit inside the EU and the euro but outside its VAT area and customs union, and carry the country’s most generous statutory reliefs: a 60% deduction against personal income tax, a 50% bonificación on corporate tax, no VAT at all — IPSI applies instead at 0.5%–10% — plus 75% off wealth tax, 99% off inheritance tax for spouses and children, and half off local taxes and stamp duty. The effective top personal rate on qualifying income is 18.8%, against 47%–54% on the mainland.
Introduction
Ceuta (population 84,208) and Melilla (86,896) are Spanish cities on the Moroccan coast, reached by ferry or air from Algeciras, Málaga and Almería. Both are ciudades autónomas — a constitutional category between a municipality and an autonomous community, created under the Fifth Transitional Provision of the 1978 Constitution and formalised by their 1995 Statutes of Autonomy. They are Spanish, EU and euro territory: Spanish civil, commercial and company law applies unmodified, courts and banks are Spanish, and Spain’s treaty network covers residents there. What they are not part of is the EU customs union or the EU VAT area — a carve-out preserved from the free-port status granted by the Ley de Bases of 22 December 1955. Schengen governs their external borders, though travellers to the mainland face identity checks at ports and airports. GDP per capita is €23,070 (~$26,900) in Ceuta and €21,118 (~$24,600) in Melilla, well below the Spanish average, with unemployment at 22.4% and 20.7% in Q2 2026.
This Ceuta and Melilla tax guide matters because it describes the only place in the European Union offering Spanish legal certainty alongside an effective personal tax rate in the high teens. Spain is a severe fiscal jurisdiction: worldwide taxation of residents, marginal IRPF rates approaching 54% in the Valencian Community, an annual wealth tax, a solidarity levy on large fortunes, an exit tax on unrealised gains, CFC rules and the Modelo 720 foreign-asset disclosure. Ceuta and Melilla opt out of none of it — every Spanish tax and every filing obligation applies. What they do is knock 50%–99% off the resulting bill, tax by tax, provided the income is genuinely generated there. That is not a tax haven in the offshore sense; it is a near-fiscal-paradise inside a high-tax state, with all the substance requirements that implies. The change to watch is the 50% social security bonificación, restored by Real Decreto 660/2023 and currently scheduled to expire on 31 December 2026.
Direct Taxes
Residents of Ceuta and Melilla are Spanish tax residents taxed on worldwide income, under the same law, forms and tax authority (AEAT) as everyone else. Relief arrives at the very end of the calculation, as a deduction or bonificación on the tax quota rather than an exemption from the base. For individuals the key concept is the deducción por rentas obtenidas en Ceuta o Melilla (art. 68.4 LIRPF), worth 60% of the quota attributable to qualifying income; for companies, the bonificación del artículo 33 LIS, worth 50%. Both hinge on the same idea — the income must arise from a business cycle that actually closes in the city, not from a contract merely signed there. Because the cities are not autonomous communities under the regional financing system, they cannot set their own IRPF scale: they apply the default scale of art. 65 LIRPF, which tops out at 22.50%, on top of the state scale of art. 63.
Personal income tax (2026 bands)
| Taxable income (EUR, USD) | Combined statutory rate | Effective rate after the 60% deduction |
|---|---|---|
| €0 – €12,450 (~$0 – $14,500) | 19.00% | 7.60% |
| €12,450 – €20,200 (~$14,500 – $23,500) | 24.00% | 9.60% |
| €20,200 – €35,200 (~$23,500 – $41,000) | 30.00% | 12.00% |
| €35,200 – €60,000 (~$41,000 – $70,000) | 37.00% | 14.80% |
| €60,000 – €300,000 (~$70,000 – $350,000) | 45.00% | 18.00% |
| Over €300,000 (~$350,000) | 47.00% | 18.80% |
The combined rate is the state scale (9.50%–24.50%) plus the art. 65 scale applicable to residents of the two cities (9.50%–22.50%). The 60% deduction was raised from 50% by the 2018 state budget law. Residents of under three years deduct against income obtained in the city; residents of three years or more may extend it to income obtained outside, capped at the net income and gains generated inside and provided at least one-third of their net wealth is located there. People who do not live in Ceuta or Melilla may still claim the 60% deduction on income sourced there — but employment income, gains on movable property and returns on deposits and accounts are expressly excluded, which narrows it in practice to rental and business income. The deduction can never exceed 60% of total tax, and withholding on qualifying investment income is halved at source, so the benefit lands in cash flow rather than only in the annual return.
Corporate income tax
| Item | Statutory rate 2026 | Effective rate after the 50% bonificación |
|---|---|---|
| Standard corporate income tax | 25% | 12.50% |
| Micro-enterprise, turnover under €1m (~$1.16m) — first €50,000 (~$58,000) | 19% | 9.50% |
| Micro-enterprise, turnover under €1m (~$1.16m) — remainder | 21% | 10.50% |
| Small entity (entidad de reducida dimensión), turnover under €10m (~$11.6m) | 23% | 11.50% |
| Newly created entity, first two profitable years | 15% | 7.50% |
| Credit institutions and hydrocarbon companies | 30% | 15.00% |
Spain’s headline rate stayed at 25%, but Ley 7/2024 layered a phased reduction underneath it: micro-enterprises pay 19%/21% in 2026, falling to 17%/20% from 2027, and small entities pay 23% in 2026, falling a point a year to 20% in 2029. The bonificación halves whatever rate applies, so a micro-enterprise trading in Melilla in 2026 pays an effective 9.5% on its first €50,000 (~$58,000) of profit. To qualify it must be domiciled there or operate through a branch or permanent establishment, hold a fixed place of business, and have operated effectively and materially for at least three years. Income earned outside the cities still counts as obtained there up to €50,000 (~$58,000) per full-time employee working in the city, capped at €400,000 (~$466,000) — the single most useful planning rule in the regime. Letting property located there expressly closes a commercial cycle; isolated transactions merely contracted there do not. Groups with consolidated revenue of €750m (~$873m) or more fall under Spain’s Pillar Two implementation, and domestic minimum-taxation rules bite at €20m (~$23.2m) of turnover.
Social security and health contributions
| Contribution (2026) | Employee | Employer | Notes |
|---|---|---|---|
| Common contingencies | 4.70% | 23.60% | 50% employer bonificación in listed sectors |
| Unemployment (indefinite contract) | 1.55% | 5.50% | 6.70% employer on fixed-term |
| Wage guarantee fund (FOGASA) | — | 0.20% | — |
| Vocational training | 0.10% | 0.60% | — |
| Intergenerational equity mechanism (MEI) | 0.15% | 0.75% | Rises annually to 2029 |
Contributions are capped at a maximum monthly base of €5,101.20 (~$5,940), above which a separate solidarity surcharge applies; there is no separate health levy, since public healthcare is funded from these contributions. The Ceuta/Melilla advantage is a 50% bonificación on the common-contingencies quota for employers and self-employed workers in agriculture, fishing, industry (excluding energy and water), commerce, tourism, hospitality, construction, financial and insurance activities, real estate and most other services. Restored by Real Decreto 660/2023, it expires on 31 December 2026 on current terms — extension is under discussion but not enacted.
Indirect Taxes
Ceuta and Melilla sit outside the EU VAT area under the VAT Directive and outside the Union Customs Territory under the Union Customs Code, so Spanish VAT (IVA) simply does not exist there. In its place is the IPSI — Impuesto sobre la Producción, los Servicios y la Importación — a municipal indirect tax created by Ley 8/1991 and administered by each city under its own ordinance. Goods shipped from mainland Spain arrive as exports (zero-rated for Spanish VAT) and pay IPSI on entry; goods leaving for the EU require customs formalities. Because the two cities legislate separately, rates have diverged over three decades.
IPSI (in place of VAT)
| Rate | Applies to (examples) |
|---|---|
| 0.5% – 10% | Statutory range for production and imports (art. 18 Ley 8/1991); the same rate must apply to local production and to imports of the same good |
| 0.5% | Essential goods; in Melilla, collective land transport, advertising and electronically supplied services |
| 1% | Electricity consumption; taxis; one-fork restaurants, bars and cafés |
| 2% | Property rentals (Ceuta); two-star-plus restaurants (Melilla) |
| 3% | General services rate (Ceuta) |
| 4% | General services rate (Melilla); professional services (both); construction and property transfers (Ceuta) |
| 8% | Telecommunications, broadcasting and television (Melilla) |
| 10% | Public works contracts (Ceuta; 4% for residential building) |
Compare that with mainland Spain’s 21% standard VAT, 10% reduced and 4% super-reduced. A professional practice billing in Melilla charges 4% where a Madrid practice charges 21% — a 17-point advantage that shows up directly in retail prices, which run below peninsular levels. Ordinances are revised annually and the cities do not move together, so check the current ordinance for the specific good or service.
Excise and other indirect taxes
| Tax | Notes |
|---|---|
| Spanish manufacturing excise duties | Largely not applicable — the cities sit outside the harmonised excise territory |
| Electricity tax | Applies |
| IPSI complementary levy — tobacco | Proportional and specific charges set by ordinance under art. 18 bis Ley 8/1991 |
| IPSI complementary levy — fuels | Per-1,000-litre charges by product; in Ceuta, €138.23 (~$161) per 1,000 l on high-octane petrol and €48.08 (~$56) on road diesel |
| Customs duties | Goods entering from third countries pay IPSI import, not the EU Common Customs Tariff |
| ITP y AJD (transfer tax and stamp duty) | State rates apply, then a 50% bonificación — see below |
Other Taxes Worth Knowing
| Tax | Ceuta and Melilla treatment |
|---|---|
| Value added tax (VAT/IVA) | None — replaced by IPSI since 1991 |
| Capital gains tax (individual) | Savings scale 19%–30%; 7.6%–12% effective where the 60% deduction applies. Gains on movable property are excluded for non-residents of the cities |
| Dividends (resident individual) | Savings scale 19% up to €6,000 (~$7,000), 21% to €50,000 (~$58,000), 23% to €200,000 (~$233,000), 27% to €300,000 (~$350,000), 30% above; 7.6%–12% effective with the deduction |
| Interest (resident individual) | Same savings scale; deposits and current accounts are excluded from the deduction for people not resident in the cities |
| Rental income | General scale; letting of property located in the cities expressly qualifies for the deduction and the corporate bonificación |
| Wealth tax (annual) | State scale 0.2%–3.5%, €700,000 (~$815,000) exempt minimum plus €300,000 (~$350,000) on the main home, then a 75% bonificación on the quota attributable to assets located there (art. 33 Ley 19/1991) |
| Solidarity tax on large fortunes (ITSGF) | Applies above roughly €3.7m (~$4.3m) of net wealth at 1.7%/2.1%/3.5%; extended indefinitely pending regional-financing reform |
| Inheritance tax | State scale 7.65%–34% with multiplier coefficients, then a 99% bonificación for Groups I and II (spouse, descendants, ascendants) where the deceased had been resident in the city for the five preceding years; 50% in other cases |
| Gift tax | 50% bonificación on gifts of immovable property located in the cities, and on other gifts where donor or recipient is habitually resident there |
| Transfer tax (ITP) | 6% on immovable property and 4% on movables at state rates, halved by art. 57 bis to 3% and 2% |
| Stamp duty (AJD) | 0.50% state rate, halved to 0.25% |
| Local taxes (IBI, IAE, IVTM, ICIO, plusvalía) | 50% bonificación on all municipal tax quotas (art. 159 TRLRHL) |
| Exit tax, CFC rules, Modelo 720 | Apply in full, exactly as on the mainland |
The pattern is consistent: nothing is abolished, everything is halved or better. A couple resident in Ceuta for five years leaving a €4m (~$4.7m) estate to their children pay inheritance tax at 1% of the normal figure. A property purchase costs 3% against the 8%–11% charged in most mainland regions. What none of it does is exempt foreign-source income for someone who moves there and keeps earning elsewhere — the deduction attaches to income generated in the territory, and for longer-term residents only up to the amount actually generated there.
Disadvantages & Risks
The first risk is geopolitical and it is live. Morocco has never renounced its territorial claim to both cities, and the frontier is the pressure point. On 30 July 2026 tens of thousands of people crossed irregularly into Ceuta in a single episode; Spain deployed the armed forces, began installing a floating sea barrier and returned the overwhelming majority within 48 hours, but Italy suspended Schengen arrangements with Spain on 31 July, Spain reciprocated on 8 August, and Denmark and the Czech Republic pressed for similar measures. Commercial land borders have been closed for years at a time in living memory — for a business whose supply chain runs through the frontier, an operating risk that can materialise in a week. Compounding it is economic concentration and scale: a combined population of 171,000, unemployment above 20% in both cities, an economy weighted toward public administration, defence, port activity and cross-border retail, no domestic capital market and a thin professional-services bench. Recruiting the full-time employees on which the €400,000 (~$466,000) corporate allowance depends is genuinely hard.
The fiscal risks are subtler. The headline benefits are statutory but not entrenched — ordinary Spanish law, amendable by any budget bill, and the social security bonificación expiring on 31 December 2026 shows how fast a pillar of the regime can become temporary. The regime also demands real substance: a fixed place of business, three years of effective and material operation, and a commercial cycle that genuinely closes in the city. AEAT audits this actively, and arrangements built on a registered address have repeatedly been denied. Sitting outside the customs union means customs friction on every shipment, mainland Spain included. On reputation the news is better than most low-tax jurisdictions can offer: as Spanish and EU territory, both cities are not on the EU list of non-cooperative jurisdictions, not on any FATF list, and sit fully inside Spain’s AML and CRS/DAC6 architecture — though foreign banks occasionally treat the address as an anomaly needing explanation. Finally, Spain abolished the golden visa in April 2025, so there is no investment-based path to residence, and the impatriate (“Beckham”) regime taxes its users under non-resident rules that do not carry the art. 68.4 deduction.
Strategy & Ideal Profile
The structure that works is the plain one: a Spanish SL domiciled in Ceuta or Melilla, with a real office, real staff and a trade that closes its commercial cycle in the city, owned by a shareholder personally resident there. That company pays 12.5% on general profits, or 9.5%–10.5% while turnover stays under €1m (~$1.16m). It bills services with 3%–4% IPSI instead of 21% VAT. Its employer social security on common contingencies is halved in most sectors. Its owner draws salary and dividends at an effective 7.6%–18.8%, pays wealth tax at a quarter rate on local assets, buys property at 3% transfer tax and passes the estate to children at 1% of the standard inheritance charge after five years of residence. The €50,000 (~$58,000) per employee / €400,000 (~$466,000) allowance for income earned outside the cities is what makes the model workable for a business with mainland or export clients: hire four full-time people locally and €200,000 (~$233,000) of externally sourced profit is treated as obtained in the city.
Who it suits: company owners running a genuine operating business — professional services, logistics, tourism, e-commerce fulfilment, port-adjacent trade — who can put people and premises on the ground and want an EU-domiciled company at or below Ireland’s 12.5%. High-earning professionals whose fee income is generated where they sit, for whom a 47% marginal rate becomes 18.8%. Retirees and dividend earners already resident in Spain and choosing between regions, since three years of residence extends the deduction to outside income and the 75% wealth tax and 99% inheritance bonificaciones are decisive for larger estates. Property investors benefit twice — rental income expressly qualifies and acquisition costs are halved. The residence test is the ordinary Spanish one: 183 days in Spanish territory with the city as habitual dwelling, the three- and five-year clocks running from documented presence.
Who it does not suit: anyone hoping to keep earning abroad and shelter it here. The deduction follows income generated in the territory, and even the three-year extension is capped by what is actually produced there — this is a regime for people who move their economic activity, not just their address. It fits badly for passive holding structures with no employees, for businesses whose margins depend on frictionless EU logistics, and for anyone needing deep local labour or capital markets. Note the limits: the social security bonificación has a stated end date, the corporate advantage compresses for groups caught by minimum taxation, and every benefit is a bonificación on a Spanish tax — it survives only as long as Spanish law says so.
FAQ
Is Ceuta and Melilla a tax haven?
No. Both are Spanish and EU territory, inside the euro, the Spanish tax authority’s jurisdiction, the AML and automatic-exchange framework and Spain’s treaty network, and they appear on no EU or FATF list. What they offer is a set of statutory reliefs — 60% off personal income tax, 50% off corporate tax, 75% off wealth tax, 99% off inheritance tax for close family, 50% off local taxes — that require real presence and real activity. It is a low-tax region inside a high-tax country, not an offshore jurisdiction.
What is the corporate tax rate in Ceuta and Melilla in 2026?
The statutory rate is Spain’s: 25% generally, 23% under €10m (~$11.6m) of turnover, 19%/21% for micro-enterprises under €1m (~$1.16m). The art. 33 LIS bonificación halves the tax on qualifying income, giving effective rates of 12.5%, 11.5% and 9.5%/10.5%. Newly created companies at 15% pay an effective 7.5% for their first two profitable years.
How does the 60% IRPF deduction work?
It cuts the tax quota — state plus regional — attributable to income obtained in Ceuta or Melilla by 60%, so a 47% marginal rate becomes an effective 18.8%. Residents of under three years apply it to income obtained in the city. From three years it can extend to income obtained elsewhere, capped at the net income and gains generated inside and provided a third of net wealth is located there. Non-residents of the cities can claim it on local-source income, but not on employment income, gains on movable property or bank deposit returns.
Do Ceuta and Melilla charge VAT?
No. They sit outside the EU VAT area, so Spanish IVA does not apply. IPSI applies instead, at rates between 0.5% and 10% set by each city’s ordinance — a general services rate of 3% in Ceuta and 4% in Melilla, 4% for professional services in both, against 21% standard VAT on the mainland. Shipments from mainland Spain are exports for VAT purposes and pay IPSI on import.
Is there inheritance or wealth tax in Ceuta and Melilla?
Both exist, both are heavily reduced. Wealth tax runs on the state scale of 0.2%–3.5% above a €700,000 (~$815,000) exempt minimum, with a 75% bonificación on the quota attributable to assets located there. Inheritance tax uses the state scale with a 99% bonificación for spouses, descendants and ascendants where the deceased had lived in the city for the five preceding years, and 50% otherwise. Gifts carry a 50% bonificación.
What are the property taxes when buying in Ceuta or Melilla?
Second-hand transfers pay ITP at the 6% state rate, halved by art. 57 bis to an effective 3% — among the lowest in Spain, where most regions charge 8%–11%. Stamp duty on notarial documents is 0.50% halved to 0.25%, and annual property tax (IBI) and every other municipal tax carry a 50% bonificación under art. 159 TRLRHL.
Can I get the benefits without living there?
Partly, and this is the most common mistake. A non-resident of the cities can claim the 60% deduction on income sourced there — realistically rental and business income, since employment income, movable-property gains and deposit returns are excluded. Companies need a fixed place of business and three years of effective, material operation. Neither relief survives an audit of a registered address with nothing behind it.
Sources
All figures should be checked against the primary government sources below. Only official government bodies are listed here.
- Agencia Estatal de Administración Tributaria (AEAT) — IRPF scales, the 60% Ceuta/Melilla deduction, corporate bonificación, wealth tax bonificación, ITP y AJD rates — sede.agenciatributaria.gob.es
- AEAT — customs and VAT status of Ceuta and Melilla — sede.agenciatributaria.gob.es (Aduanas)
- Tesorería General de la Seguridad Social — 2026 contribution bases and rates, Ceuta/Melilla bonificación — seg-social.es
- Boletín Oficial del Estado — Ley 8/1991 (IPSI), Ley 27/2014 art. 33, Ley 35/2006 art. 68.4, RDLeg 1/1993 art. 57 bis, RDLeg 2/2004 art. 159, Ley 29/1987 art. 23 bis, Ley 7/2024, Real Decreto 660/2023 — boe.es
- Ciudad Autónoma de Ceuta — IPSI fiscal ordinance and rates — ceuta.es
- Ciudad Autónoma de Melilla — IPSI fiscal ordinances and rates — melilla.es
- Ministerio de Asuntos Exteriores, Unión Europea y Cooperación — status of Ceuta and Melilla in the Schengen Area — exteriores.gob.es
- Instituto Nacional de Estadística (INE) — population, GDP per capita and unemployment — ine.es
- European Central Bank — euro foreign exchange reference rates — ecb.europa.eu
USD figures are indicative conversions at ~1 EUR = 1.1643 USD (ECB reference rate, 28 August 2026) and rounded.
Last verified: 29 August 2026.
This is general information, not personal tax or legal advice. Tax outcomes depend on your specific facts; consult a qualified Spanish tax adviser before acting.
Related guides: Andorra · Argentina · Australia · Bahamas · Botswana · Bulgaria · China · Costa Rica · Cyprus · Denmark · Dominican Republic · El Salvador · Estonia · Georgia · Gibraltar · Greece · Hawaii · Iceland · Indonesia · Italy · Jersey · Kuwait · Latvia · Malta · Mauritius · Monaco · Montenegro · Morocco · New Zealand · Panama · Paraguay · Seychelles · Singapore · South Korea · Taiwan · Thailand · Ticino · UAE · Uruguay