The tax relationship between Spain and the Basque Country is governed by the Concierto Económico, or Economic Agreement, which provides the Basque Autonomous Community with the majority of the more usual revenues collected under a Treasury system. Beyond its purely economical connotations, the Agreement grants full autonomy to the Basque public authorities and empowers the exercise of functions and services corresponding to the Basque Country under the Statute of Autonomy approved on December 18, 1977.

The system known as the Concierto Económico, or Economic Agreement - the origins of which date back to the second half of the 19th century - was ratified in 1978 through the recognition, in the First Additional Disposition of the Spanish Constitution, of the special political and historical status embodied in the fueros, the system of Basque laws and historic rights. Chapter III of the Statute of Basque Autonomy endows the Basque Country with its own Autonomous Treasury to exercise and develop its competencies.

  So the Basque Country has the power to regulate taxes and the necessary autonomy to manage and collect them. Besides a series of general principles, rules on harmonisation and standards governing collaboration, the Economic Agreement also contains the rules or points of connection that determine when the Basque or common Spanish tax system prevails and which administration is entitled in which cases to exact the taxes. 

The Economic Agreement therefore implies the existence of a specific Basque tax system with its own way of regulating the taxes that comprise a general tax system, including, among others, IRPF (income tax), Company Tax and Value Added Tax.

With a view to avoiding any potential imbalance arising from the application of the Statute of Autonomy and the Economic Agreement, the Basque Country remits some of the taxes collected to the Spanish Treasury to cover general expenditure on areas of national interest, including foreign affairs, defence and the armed forces, customs and general transport.

The contribution the Basque Country makes is known as the Cupo, or Quota, and the amount to be paid is set according to national expenditure. In other words, the Basque Country pays the Cupo to central government in accordance with the state’s general burden, and not according to its available resources. The Basque Country thus contributes according to its capacity, to its relative revenue, as the Cupo is calculated by applying the Basque contribution capability ratio to general Spanish expenditure.

Pacts and covenants affecting the Economic Agreement between the Basque Country and the Spanish authorities are struck between the twelve members of a specially-appointed mixed committee (one member from each Diputación Foral, or Provincial Council, three from the Basque Government and six from central Spanish government).

The present Concierto Económico - which came into effect on June 1, 1981 and runs out on December 31, 2001 - provides for four laws to be passed in that time (the successive Quota Acts, one for each five-year period, requiring the prior agreement of the mixed committee) which determine the methods used to decide the Cupo for the next five years.

The Basque Treasury’s Integrated Annual Report, published by the Basque Tax Coordination Agency gives full details of the activities of the various Treasuries included in the Basque institutional structure, together with an explanation of the content and evolution of the Economic Agreement itself.