Lawyers Patricia Lalanda and Teresa Valdelomar, members of the law firm Loyra Abogados, shared their points of view regarding the situation of Ceuta, the Spanish autonomous city that currently stands out for the tax advantages it offers to the online gaming sector.
In an interview with Yogonet, the Spanish lawyers stated that although Ceuta's tax regime is attractive, it is also important that the Spanish jurisdiction provides legal security for operators and the rest of the players in the gaming sector.
Furthermore, Lalanda and Valdelomar recommended strengthening other aspects, such as education, which could make the city even more attractive for the industry, not only in gaming but also in the digital industries.
What are the legal, tax, and regulatory factors that show the advantages offered by the autonomous city of Ceuta compared to other jurisdictions, such as Malta or Gibraltar?
On the tax side, with the modification introduced in 2018, Ceuta undoubtedly has a unique and ideal legal-tax framework that places it in a privileged position compared to other places that have been traditional gaming hubs, such as Malta or Gibraltar.
Ceuta, fully integrated as is evident in the framework of the European Union, from the tax point of view has a highly attractive tax regime: the reduced rate of 10% in the Tax on Gaming Activities (IAJ) for operators located there as well as the unbeatable indirect taxation under the Tax on Production, Services, and Imports (IPSI) are undoubtedly the distinguishing features.
However, it is important to highlight the rest of the advantages, already established, that Ceuta offers in other tax figures. These other advantages complement the specific ones that are of interest to the gaming sector, since, for example, they make the direct taxation regime especially attractive for individuals who provide their services as employees to the operators established there.
If we focus on the aspect of international taxation, the Ceuta companies -and therefore companies of a Member State of the European Union- fall within the entire system of agreements signed by Spain to avoid international double taxation, with special relevance in Latin America. We believe that this aspect is different compared to other jurisdictions.
How much has Brexit affected this growth and change of rules in Ceuta?
Particularly, the Spanish Law that regulates online gaming (Law 13/2011) clearly states in Article 13.1: the license is granted only to EU nationals or European Economic Area Countries, i.e. companies with fiscal addresses in those countries. Therefore, entities that intend to obtain a license and maintain it under this law must be based in European territory or European Economic Area Countries.
Following the exit of the United Kingdom from the European Union, it was necessary for all online gaming operating entities that were based in Gibraltar to transfer their legal address to Gibraltar prior to Brexit. Otherwise, the license cancellation procedure provided in Art. 9.5 of the aforementioned Law would be automatically triggered.
It was no coincidence that the 2018 General State Budget Bill presented some significant changes for online gaming operators with their fiscal headquarters in Ceuta and Melilla, by reducing the IAJ by 50%. A successful strategy to attract operators who were looking for a new territory within the European Economic Area.
The autonomous city of Ceuta.
Aside from tax incentives, what other measures do you think the authorities should take to continue to grow in this segment and attract more investment from the industry?
First, it is essential that Ceuta can provide an environment of legal certainty that the operators and the rest of the players involved in the industry can clearly perceive. This is a key issue since the reform is relatively young. The work of the Directorate General of Taxes has been relevant in the issuance of the binding consultations that have interpreted it. But it will be essential to be attentive to the uses and practices of the sector and to the Tax Agency's review of the practical application of the regulations.
Secondly, it would also be of great help to continue with the boost that is being given to the training of qualified profiles that can meet the needs of companies that decide to establish themselves there. These profiles can also vary and be enriched with different positions that need to be filled if Ceuta looks to the Latin American market and establishes itself as a gateway to the European market by structuring international groups.
In line with this idea -qualification, variety, and enrichment of profiles-, we believe that the interrelation with the education and training sector is also key, an aspect that is again related to the attractiveness that Ceuta can have as a hub not only for gaming but also for the digital industry, stressing on this point that the area of Education is one of the competences attributed to the Autonomous Communities and that, therefore, it can be an interesting growth leverage. The gaming industry is not the only one suffering from the lack of profiles in Spain. It is one of the key challenges to be faced.
Finally, once the Law for the Promotion of the Ecosystem for Emerging Companies (Startups Law) is approved, it will be convenient to make an additional analysis of whether Ceuta can stand out from other locations.
Is this new hub designed exclusively for European companies, and why is Ceuta mentioned as the gateway to Latin America?
This new hub is designed for any company -European or not, existing or newly created- that provides offshore services and, in addition, gaming, working with digital content, marketing, and customer service, among others.
For many years, Spain has been considered the bridge between Latin America and the European Union for various reasons, such as the common language, Spanish, which is spoken in most Latin American countries and Spain; historical ties; as well as treaties and agreements between the regions.
What sets the territory of Ceuta apart, in addition to the above-mentioned in terms of taxation, is a local government that believes in and fervently supports the online gaming industry as no other Spanish leader has done so far. This is undoubtedly fundamental to creating and maintaining a favorable ecosystem for this industry.