Skip to content
Tax & legal glossary Tax

Economic Agreement (Basque Country)

The Economic Agreement is the legal instrument (Law 12/2002) governing tax and financial relations between the Spanish State and the Basque Country. It recognises the power of the foral councils of Bizkaia, Gipuzkoa and Álava to maintain, establish and regulate their own tax systems, and the Basque Country's obligation to contribute to the State's general burdens through the quota (cupo). It also sets the connection points that determine which administration is competent for each taxpayer and tax.

The Economic Agreement is the legal instrument (Law 12/2002) governing tax and financial relations between the Spanish State and the Basque Country. It recognises the power of the foral councils of Bizkaia, Gipuzkoa and Álava to maintain, establish and regulate their own tax systems, and the Basque Country's obligation to contribute to the State's general burdens through the quota (cupo). It also sets the connection points that determine which administration is competent for each taxpayer and tax.

In practice

What the Economic Agreement is

The Economic Agreement is the piece that makes the Basque foral regime possible: a negotiated law between the State and the Basque Country (today, Law 12/2002) that grants the historical territories the power to maintain, establish and regulate their tax systems, and organises the coexistence of five treasuries (three foral, Navarra’s and the State’s) through connection points.

Its balance closes with the quota: the Basque Country’s annual contribution to non-transferred State functions. The system enjoys constitutional protection under the first additional provision and a history of more than a century, since the first agreement of 1878.

What it means for the taxpayer

For individuals, the connection point is habitual residence: a resident of Bizkaia pays income tax to the Hacienda Foral of Bizkaia under Norma Foral 13/2013, not under the state LIRPF. Substantial differences in scales, deductions and special regimes follow, including the displaced workers regime of article 56 bis, the foral counterpart of the Beckham Law.

For companies, the connection points combine tax domicile and turnover, and determine both the applicable legislation and the auditing administration. Conflicts are resolved by the Agreement’s Arbitration Board.

Related service

Tax & Fiscal

View service

Frequently asked questions

The Agreement governs the Basque Country (Bizkaia, Gipuzkoa and Álava) and the Convention governs Navarra. The logic is the same: own taxing power plus a contribution to the State's general burdens (the quota under the Agreement, the aportación under the Convention).
The amount the Basque Country pays the State as a contribution to non-transferred functions (defence, foreign affairs, the Crown, among others). It is calculated under a five-yearly methodology law and updated annually.
In the agreed taxes with autonomous legislation (personal income tax, corporation tax, wealth, inheritance), considerably: own scales, deductions and special regimes, within harmonisation limits (equivalent overall tax pressure, respect for the system's general structure). VAT and excise duties are agreed but follow common legislation.
Back to glossary

DGT Observatory

Related DGT tax rulings

V3580-20

The competent administration for Personal Income Tax is determined by habitual residence according to successive criteria

The taxpayer asks which administration should collect her 2019 Personal Income Tax following the sale of her habitual residence. The DGT explains that competence depends on habitual residence, which is determined through criteria of permanence, center of interests, and last declared residence.

2020
V0250-20

Tax residence determined by the permanence criterion, counting temporary absences as days in the habitual territory

A taxpayer has enquired whether they were a tax resident in Spain in 2018 after spending part of the year in England. The DGT has ruled that if the stay abroad constitutes a temporary absence, it must be counted as time spent in the habitual territory of residence to determine the tax administration's jurisdiction.

2020
V2861-19

Income from a forestry activity in a community of property is attributed to the co-owners according to their residence

A co-owner of forests in Bizkaia has requested clarification on whether the attribution of income from forestry activities is correct. The Directorate General of Taxes (DGT) indicates that while the management of the entity falls under the Provincial Administration, the assessment of income for a co-owner residing within the common territory is carried out in accordance with state regulations.

2019
V3176-17

Obligation to provide electronic information via AEAT depends on inspection competence and settlement period

A company based in the Basque Country with a turnover exceeding 7 million euros has enquired whether it must perform Immediate Supply of Information (SII) through the AEAT. The DGT has ruled that, as it pays taxes in both common and regional territories, the obligation to maintain registration books via the AEAT electronic office only applies if inspection competence lies with the State Administration.

2017
V3174-17

Obligation to provide information via SII depends on inspection competence and settlement period

An entity based in the Basque Country with a turnover exceeding 6 million euros seeks clarification on whether it must comply with the Immediate Supply of Information (SII) system before the AEAT. The DGT rules that, as the entity pays taxes in both common and regional territories, the obligation to use the SII before the State Tax Agency will depend on whether inspection competence lies with the State Administration.

2017
V1298-17

State Administration holds jurisdiction if habitual residence moves outside the Basque Country

A taxpayer has requested clarification on which administration to file their Personal Income Tax (IRPF) with after moving their residence from Biscay to Madrid. The Directorate General of Taxes (DGT) ruled that jurisdiction depends on habitual residence, which is determined by the number of days spent within the territory.

2017

Binding rulings from Spain's Directorate General for Taxes (DGT). Each ficha is published in Spanish.

Browse all DGT tax rulings →
Email
Contact