What makes one jurisdiction more attractive than another when cities compete for industries that bring investment, jobs and growth? In Melilla, the Spanish autonomous city on the North African coast, the answer is not a separate gambling regime but the combination of Spain’s national framework with a special fiscal system designed to encourage economic activity.
Operators based in Melilla remain subject to Spain’s national gambling regime and the oversight of the Directorate General for the Regulation of Gambling (DGOJ). What changes is the tax treatment — and access to those advantages depends on companies having real operations in the city.
“A company established in Melilla operates under exactly the same regulatory framework as any operator based anywhere else in Spain,” says Patricia Lalanda, partner at Loyra Abogados, who works closely with Melilla on its iGaming strategy. “The DGOJ remains the competent authority for licensing, supervision and enforcement.”
For companies weighing the city, that reframes the question: not whether regulation is easier, but whether part of the business can genuinely be run from there. And the proposition is no longer untested. Lalanda describes the initial response as caution rather than scepticism, with companies looking for evidence the model could work over time. “Today, Melilla is no longer a concept or a policy initiative; it is an established business environment,” she argues. International operators have built operations there, technology companies have followed, and there is now enough practical experience to assess the model on real commercial outcomes rather than expectations.
The tax break comes with a substance test
The advantage is not a lighter licensing path. “The key question is not whether obtaining a licence becomes easier by establishing operations in Melilla — it does not — but whether the business can genuinely build part of its operations there in a way that satisfies the legal requirements of the special tax regime,” Lalanda says. Management, staff and decision-making cannot exist only on paper: the office, the management functions, the operational processes and the decision-making capacity must genuinely be present.
For an established operator, that can make relocation more complex than the headline rates suggest, since businesses must decide which teams could realistically move and whether it makes sense for the wider group. A new entrant has more freedom to build Melilla into its structure from the start.
The differences are significant. Lalanda points to a 50 per cent reduction in corporate income tax liability on qualifying income genuinely obtained in Melilla, which can bring the effective nominal rate to around 12.5 per cent. Qualifying operators can also pay gambling tax at 10 per cent of gross gaming revenue, against the 20 per cent general rate in Spain. Melilla also applies IPSI rather than VAT, with a 0.5 per cent rate available on services such as fraud prevention, data processing and certain advisory work. Personal income tax, meanwhile, carries a 60 per cent rebate for Melilla residents, easing the combined tax-and-labour cost of attracting senior staff.
Suppliers have a different calculation
Melilla is now looking beyond B2C operators. Early attention centred on licensed gambling companies, but suppliers, technology firms and specialist service providers are becoming a bigger part of the proposition. “Behind every licensed operator sits a much wider ecosystem of specialised businesses,” Lalanda notes — platform developers, software and payment providers, identity verification and cybersecurity firms, compliance consultancies, fraud prevention providers, CRM companies, data analytics businesses and digital marketing agencies. Many need no gambling licence, since they sell technology or professional services rather than gambling itself; their concerns run instead to data protection, cybersecurity, intellectual property and financial rules.
That shift coincides with Spain reconsidering how suppliers fit into gambling regulation. The DGOJ has begun reforming the 2011 Gambling Law and, following a public consultation, is meeting industry groups before drafting new legislation. Among the issues under review: stronger identity and payment checks, action against illegal gambling, advertising involving celebrities and influencers, and further player-protection measures. The consultation singles out suppliers, noting the existing law was built around operators and did not anticipate the weight suppliers would come to carry — and proposes bringing them more explicitly into the legal framework.
Melilla is not alone in this tilt. In Malta, MGA figures for the first half of 2025 showed B2B businesses accounting for 55.5 per cent of the licence base, 64.3 per cent of new applications and 87.5 per cent of licences issued in the period.
From gambling hub to digital hub
For Melilla, the ambition reaches further than a supplier base around gambling. Lalanda sees the technological expertise already drawn into the city as a foundation for other industries — artificial intelligence, cybersecurity, blockchain, cloud services, digital identity, data analytics and compliance technology, sectors that share much with online gambling but whose opportunities extend well beyond it.
Her longer-term view is that gambling could become an entry point rather than an end point. “Melilla’s long-term ambition should not simply be to attract more gambling operators,” she says. “Its real opportunity lies in becoming a recognised digital business hub — European Union territory, competitive taxation, regulatory certainty and a supportive administration, capable of attracting innovative technology companies across a range of sectors.”
Pillar Two puts more weight on substance
Lalanda also points to Pillar Two, the global minimum tax framework under which groups with consolidated revenues of at least €750 million can face a top-up tax where their effective corporate rate in a jurisdiction falls below 15 per cent. Her argument is not that this makes Melilla automatically cheaper, but that very low nominal rates may become less decisive for the largest groups, shifting the weight to where companies can actually place people and functions.
“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,” she says. “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.”
That leaves operators and suppliers with a practical question. Melilla’s tax treatment can change the economics of a Spanish operation, but the benefits depend on more than incorporation: a company has to decide what it can genuinely put in the city — staff, management, technology or support functions — and whether that structure still makes sense once tax is no longer the only consideration.
Read the full interview by Garance Limouzy on SiGMA News.
