There is no VAT here: there is IPSI
Ceuta lies outside the territory in which Spanish VAT applies. What operates instead is the IPSI, the indirect tax on production, services and imports, which belongs to the Ciudad Autónoma and not to the State. Broadly, it taxes the importation of goods into the territory, the production or manufacture of goods carried out here, and certain supplies of services, with rates and cases set by the city itself in its own tax by-laws.
We are not going to publish those rates or the list of exemptions: they are amended by by-law, and an out-of-date figure on a website is worse than none. What we can tell you is that the mechanics differ from VAT — different administration, different forms, a different counter — and that the deduction of tax borne does not work the same way. Anyone who simply transplants the mainland scheme ends up having charged VAT that was not due and left IPSI unpaid.
A word about the name, because it confuses arrivals from the mainland and from abroad alike: the Ciudad Autónoma is the city's own government, holding powers of the kind that elsewhere belong to a region, and the IPSI is its tax. So the rate on a transaction is not found in a state act but in a local by-law, and it is read on the day it is applied.
Invoicing between Ceuta and the mainland
Exclusion from VAT territory carries a consequence worth being very clear about in both directions. Supplies of goods dispatched from the mainland to Ceuta are treated as exports for VAT purposes and are exempt; on arrival, the transaction falls under IPSI as an import. Conversely, goods entering the mainland from Ceuta are treated as an importation, with their own customs clearance.
The practical upshot for a business here is that buying from the mainland is an operation with two halves, one at the Spanish end and one at this one, each with its own paperwork and its own timing.
With services the position is finer and depends on the place-of-supply rule applicable to each type of service and on the status of the customer. This is ground where general answers are of little use: they are looked at service by service. We handle it in invoicing abroad from Spain.
The income tax allowance on the tax due
Personal income tax is a state tax, but the act provides an allowance against the tax due on certain income obtained in Ceuta, designed precisely to offset the extra cost of the city's economic isolation and its border condition.
Here we are deliberately cautious and publish neither the percentage nor the exact number of years of residence required: these are figures that have been amended, and they should be checked in the wording in force on the day they are applied. What is structural, and what is actually examined, are two things. First, that the allowance requires effective residence in the city, and effective means living here, not appearing on the padrón municipal register. Second, that not all income is treated alike: income obtained in Ceuta and income obtained elsewhere are not handled the same way, and there are particular rules for the income of someone who has not yet completed the required period of residence.
Electricity and water consumption, where the children go to school, medical records, card movements, border crossings. Effective residence is proved with everyday life, not with a certificate. Anyone applying it while genuinely living somewhere else is exposed to an assessment for every open year, which means four, plus interest and a penalty argued separately. We deal with it in answering the tax office.
Who writes to us from Ceuta
| Who | What has to be resolved |
|---|---|
| Shop supplied from the mainland | Purchases exempt from VAT at origin and IPSI on import when they arrive |
| Professional invoicing mainland clients | Whether the service carries VAT, IPSI or neither of them |
| Resident with income from here and from elsewhere | Which part of the tax due is allowed and from when |
| Someone who has just moved here to live | Evidencing effective residence from day one, not when it is demanded |
| Owner of a property in the city who lives away | Modelo 210, per property and per owner |
Working with Ceuta, remotely
Our office is in Melilla, the other autonomous city, which means the IPSI and the income tax allowance are not a textbook curiosity to us: they are daily work. Even so, each city has by-laws of its own and we do not assume that what applies there applies here: the Ceuta rules are checked before any advice is given.
We work remotely, in Spanish, English and French, at a fixed fee and with the figures shown to you before anything is filed. And we promise no results: we will tell you what is solid, what is arguable and what risk you are taking with each option.
A teacher moving to Ceuta: which income qualifies for the allowance
A teacher moves from Madrid to Ceuta in September 2025 and has lived here since. In 2026 she earns a salary of 34,000 € for her work in the city, lets her former flat in Madrid, which leaves her 5,000 € net, and has 600 € of interest. Residents of Ceuta enjoy an allowance on their income tax, but it is not applied to the whole tax bill, only to the part corresponding to income obtained in Ceuta. With simplified figures:
| Income | Amount | Obtained in Ceuta? | What is checked |
|---|---|---|---|
| Salary | 34,000 € | Yes: the work is done here | Actual residence and the required period |
| Rent from the Madrid flat | 5,000 € | No: the property is elsewhere | Taxed without the allowance |
| Bank interest | 600 € | Depends on where it is treated as obtained | The bank and the rules in force |
| Share of the tax that qualifies | Up to 85.9 %: 34,000 out of 39,600, if the interest does not count as obtained here | ||
The allowance percentage set by the current wording of the law is applied to that share; out of caution we do not state it here. The practical conclusion is firm, though: every euro obtained outside Ceuta dilutes the allowance, and selling or letting property on the mainland changes the year's sum.
During the year the allowance can be partly brought forward: withholding on the salary is calculated taking the credit into account when the payer knows the work is done in Ceuta and the residence is here. If it has not been taken into account, the excess withheld comes back in the annual return; if it has been applied without the requirements being met, there is tax to pay. Check the first payslip after the move, not the December one. And if the payer is on the mainland, do not take it for granted: tell them in writing where you live and where you work from the first month.
The first year in Ceuta, step by step
| When | What |
|---|---|
| On arrival | Register on the padrón, the municipal register of residents, and change your tax address with Modelo 030; the tax office still holding the Madrid address is evidence against you |
| During the year | Keep what proves life here: rental contract, utilities, school, doctor, cards |
| April to June | Income tax return with the allowance calculated by the source of each income |
| If she sells her former home | Two years to reinvest in the new main home, if she wants the exemption |
Changing the tax address is covered in sorting out your tax address.
What almost nobody in Ceuta asks: the gain on selling the former Madrid home is income obtained elsewhere and does not qualify for the allowance, even though you now live here. It can be exempt if you reinvest in your new main home, and the flat keeps its status as a main home if it is sold within the two years after you stopped living in it. After that period it does not, and the exemption is lost even if you reinvest every last euro. If you are in that position, tell us about the sale before signing.