Grupo Asegi has been working with the Economic Agreement since 1982. The Economic Agreement is the legal regime governing financial and tax relations between the Autonomous Community of the Basque Country and the Spanish State, giving the Foral Tax Authorities of Bizkaia, Gipuzkoa and Araba the power to regulate, collect and manage the main taxes in their territory.
What the Economic Agreement is
It is a historic agreement protected by the first additional provision of the Spanish Constitution, which recognises and respects the foral rights of the historical territories of the Basque Country. Its most recent renewal was approved by Law 12/2002.
In practice, the Agreement gives the Juntas Generales of Bizkaia, Gipuzkoa and Araba two powers:
- Full legislative power over direct taxes: personal income tax (IRPF), Corporate Income Tax, Wealth Tax, Inheritance and Gift Tax, Transfer Tax.
- Power to manage and collect the main indirect taxes: VAT and Excise Duties.
Historical origin and current validity
The Economic Agreements originate in the 19th century, after the abolition of the traditional Fueros. Following the democratic transition, the Agreement was recognised constitutionally and the Economic Agreement Act currently in force was approved.
Which taxes the Foral Tax Authority manages vs the state AEAT
IRPF
Individuals habitually resident in the Basque Country file their IRPF return with the corresponding Foral Tax Authority.
Corporate Income Tax
Companies with their tax domicile in the Basque Country pay tax to the corresponding Foral Tax Authority. This includes tax rates of their own, the foral form 200 instead of the state one, and a system of deductions (especially R&D&i, employment and investment) substantially more generous than the common regime.
VAT
VAT is a tax harmonised at European level, but its management is shared between the Foral Tax Authority and the AEAT according to the taxpayer’s volume of transactions.
And Navarra: the Economic Convention
Navarra is not part of the Basque Economic Agreement: it is a separate foral community, with its own Navarra Foral Tax Authority, and is governed by the Economic Convention between the State and the Foral Community of Navarra.
The result is similar — legislative and collection powers of its own over the main taxes — but it is a different legal framework from that of Bizkaia, Gipuzkoa and Araba. That is why a Navarrese company does not pay tax in the same way as a Bizkaian one, and the two regimes should not be mixed.
How it is determined where a company pays tax
| Volume of transactions | Taxation |
|---|---|
| < €7 million a year | Pays tax entirely in the territory of its tax domicile |
| ≥ €7 million a year | Pays tax proportionally according to the volume of transactions carried out in each territory |
Why you need an adviser specialised in foral rules
An advisory firm that only knows the Spanish common regime does not handle these well:
- The foral forms (the foral Form 200 is not identical to the state one).
- The foral deductions, with different percentages and requirements.
- The foral deadlines, which do not always coincide with the state ones.
- The Agreement’s allocation rules for multi-territory companies.
- Direct dealings with the Foral Tax Authorities.
Frequently asked questions
- Can my company come under the Economic Agreement?
- If your company has its tax domicile in Bizkaia, Gipuzkoa or Araba, it automatically pays tax under the corresponding foral regime. It is not optional.
- How do I know whether my company pays tax under the foral or the common regime?
- The main criterion is the tax domicile declared to the tax administration. If it is in the Basque Country, the company pays tax under the foral regime.
- What happens if I have clients outside the Basque Country?
- If your company has its tax domicile in the Basque Country, it continues to pay tax entirely under the foral regime until it exceeds €7 million a year. Above that threshold, proportional allocation applies.
- Can the Foral Tax Authorities change the tax rates?
- Yes. The Juntas Generales of each territory approve their own tax rules within the limits of the Agreement.
- Does Navarra have an Economic Agreement as well?
- Not exactly. Navarra has an equivalent instrument called the Economic Convention, governed by Law 28/1990.
General information only; it does not replace professional advice. Foral legislation changes frequently — check the date it was last updated.