In accordance with the provisions in Article 144.b) of the Spanish Constitution, the cities of Ceuta and Melilla (while continuing to be Local Entities) both have Statutes of Autonomy, which are respectively approved by Organic Laws 1/1995 and 2/1995 of 13 March.
In turn, these cities participate in some of the financing mechanisms of the Autonomous Communities. Thus, in accordance with the provisions in section 3, letter j of Article 6 of Law 21/2001 of 27 December, which regulates the fiscal and administrative measures of the new common Financing System of Autonomous Communities and Cities with a Statute of Autonomy, Ceuta and Melilla will have a Sufficiency Fund allocated with 1999 as the base year, constituted by the value of the transferred services and the autonomy subsidies in said year.
Likewise, Ceuta and Melilla are fully integrated in the mechanism of the Inter-territorial Compensation Funds, in accordance with the provisions set forth in Law 22/2001 of 27 December, which regulates the Inter-territorial Compensation Funds.
Moreover, they participate in the financing mechanisms of Local Public Finance Offices, as established in the revised text of the Law regulating Local Public Finance Offices.
The geographic location of Ceuta and Melilla justifies the existence of a special tax system whose most notable aspects are the following:
Direct taxation:
- Impuesto sobre la Renta de las Personas Físicas (Personal Income Tax): A deduction will be applied of 50% of the quota corresponding to income obtained in Ceuta and Melilla.
- Impuesto sobre Sociedades (Corporation Tax): A subsidy of 50% will be applied to the quota corresponding to income obtained in Ceuta and Melilla
- Impuesto sobre Sucesiones y Donaciones (Tax on Inheritances and Donations): A subsidy of 50% will be applied to the quota when the deceased or donor is resident in Ceuta or Melilla, the subsidised percentage rising to 99% when the deceased or donor is a spouse, parent, grandparent, or descendant.
Indirect taxation:
- Impuesto sobre el Valor Añadido (Value Added Tax): Not applicable. Instead, the Impuesto sobre la Producción, los Servicios y la Importación (IPSI, Tax on Production, Services and Imports) is applicable.
- Impuestos Especiales (Excise Duties): only the Impuesto Especial sobre Determinados Medios de Transporte (Special Tax on Certain Modes of Transport) and, among manufacturing taxes, the Impuesto Especial sobre la Electricidad (Special Electricity Tax) are applicable. However, there is a supplementary levy of the IPSI on work associated with tobacco and on fuels.