Ceuta: How to Pay 50% Less Taxes Without Leaving Spain | EBC11

Well, good morning uh everyone and thank you very much uh for inviting me in order to to explain um uh about Tota and what is the reason why uh the government of Tota decided to to be present at this at this convention and even with uh with a stand that we already have here. But let me introduce myself. Um, my name is Phelipe Masa and I and I am a tax a tax director of EY at EY in Spain uh of the tax of of the tax practice and we are supporting uh from EY we are supporting the the theta government in order to explain and to promote the the the the special tax the the special tax regime in force uh in Spain for for this city. Um first of all I for those who doesn't know what is Theota and what is Theota uh I would like to clarify that Theota is a Spanish city located in the in the north of Africa with um with border with with Morocco. For those who knows where is uh Gibralar Theota is in front of Gibralar in the in the in the African side.

Um, as commented in in my in in the cover of my presentation, Thot has one of the um best tax regimes available nowadays in in Europe. uh when when companies and and sea level uh employees uh meet with us in order to to know about theta they always ask the first thing that they always ask us is whether uh there is a a legal security about this this tax regime. Um in this in this regard uh you have to take into consideration that theta is part of Spain and therefore uh it is part of Europe as well. Um when when Spain uh requested back in the 80s their admission to the European Union uh the Brussels uh authorities check and reviewed the um the the the tax regime and they agreed that they are fully in accordance with the European principle. So at the end of the day, we are not talking about a a tax heaven.

We are talking about a tax regime fully applicable in in Spain and fully applicable in in Europe. Um if you see in this in this slide, I would like to talk about uh first of all about the corporate income tax. Um, in Spain we have a 25% tax tax rate and that that that general tax rate can be reduced uh by applying a a a 50% discount. So at the end of the day um the benefit that you obtain uh due to the fact that you run your business from the city it is going to be taxed at a final rate of 12.5 in theta.

For that purposes you have to comply with some requirements. First one the effective management of the company must be located in the city. We we normally recommend that the the board of directors must be physically residing in theta in order to justify that the effective management of the company is over there. But we know that most of the cases that the business already relocated to Theota are international companies, multinational companies. And in this case, we highly recommend that if the board of directors cannot leave in the at least they must travel to the city on a quarterly basis in order to maintain the meetings and to justify that the decision making is is from the is from the city.

Second requirement, you must have substance in the city. Substance in terms of um having um human and material resources in the city. At the end of the day, this tax regime is is thought due to the fact that if you relocate your your your business into the city, you must uh create economic activity uh within the city. This is the idea and this must be justified in order to apply the the the special tax reim for individual income tax. We have a 60% uh deduction comparing with the with with with living in in mail for example.

For that purposes you must be present physically present in theta for at least half of of the year at least 183 days in the city. uh you know that in Spain the the individual income tax is a a progressive uh tax uh and and you are going to be taxed uh depending on the h income that you earn h during the year the highest uh tax rate in Spain on individual income tax basis is 40 49% and if you live in theta and you earn this kind of money at the end of the day you are going to pay uh around 20% of the of the of the ear of the money that you you earn. Um the rest of the of the taxes are already discounted at least up to uh 50%. But I want to talk about um the gaming tax because I feel um that this taxes it is really important because it changes the uh the economic model of of the city. I want to rein uh to 2018 2019 where we have the Brexit if you remember we we also have the the closure of the border with Morocco and we also have uh the um the COVID pandemic.

In that sense, um, if you remember, uh, with the Brexit, all the I gaming companies already located in in Gibralar must move the the the their their headquarters in order to continue working for the Spanish market. And Theota attracted most of the operators already located in in in Gibralar. And at the end of the day uh they they they create a a a great atmosphere of tech companies in the city. uh from EY we have made um a report where we analyze the uh the impact the economic impact uh for the CD of the gaming industry and we we we realized that um almost 80% of the operators previously uh located in Gibraltar are nowadays in the create in five years 1 1,000 200 employees and and [clears throat] uh almost the 80% of the turnover of the companies with doicile in theta corresponds to the gaming industry. That means that um it's it's a a case of success.

the and the the government attracted all the gaming industry and nowadays what they want is to make a a step ahead with other techn technological companies and this is the reason why uh we are here we are at this convention with our stand in order to explain all of you uh what is theota and what is the tax regime of the at the of the day you have to take into consideration that um it is from my point of view it it should be compulsory to analyze theta from a tax perspective. uh we one one client of us uh requested to analyze the uh the the profitability of one uh project uh comparing to run this project from mainland Spain and from the if you see uh from from me Spain the profitability of of this uh of this project is up to 10% and the same project developed from uh from from Toyota instead of mainland the profitability jumped to 23%. So at the end of the day we are saving taxes we are uh we are obtaining more profitability and what is true is that it's a uh we we we can obtain a legal security uh uh on on the application of this of this tax regime and the the final the final point is that you are going to find out that you are going to have um um um a lot of support from the from the government of Tota. So at the end of the day um I I really recommend that you you can analyze the of a possible location to to to well to run your your European business because at the end of the day we are uh we are Spain, we are European Union. Thank you very much.