Taxation in Euskadi is levied by the central government, the eskualde (county municipality) and the udalerri (municipality). The tax level in Euskadi is slightly above average in the advanced economies of Europe. In 2010 the total tax revenue was 39.8 % of the gross domestic product (GDP). Many direct and indirect taxes exist. The most important taxes—in terms of revenue—are income tax and VAT. Most direct taxes are collected by the Euskadi Tax Administration and most indirect taxes are collected by the Euskadi Customs and Excise Authorities.

Tax administration

The Ogasun-Sailburua (Ministry of Finance) sets up the Eusko Jaurlaritza's tax program. In order to implement the tax program decided by the Eusko Legebiltzarra, the Ogasun-Sailburua (Ministry of Finance) is supported by two subordinate agencies and bodies.

The Zerga Kudeaketarako Zerbitzu (Tax Management Service) ensures that taxes are set and collected in the correct manner. It issues tax cards, collect advance tax and check the tax-return forms that are required to be submitted each year. The tax management service also determines and monitors national insurance contributions, and value-added tax and are responsible for providing professional guidance and instruction to local tax collection offices that collect direct taxes.

The Aduana Zerbitzu (Custom Service) ensures that customs and excise duties are correctly levied and paid on time. In addition, they are responsible for preventing the illegal import and export of goods in Euskadi. The customs and excise authorities set and collect customs duties, value-added tax on imports and special duties.

Direct taxes

Income tax

Individuals who are resident in Euskadi or have their normal place of abode there have full income tax liability. All the income earned by these persons both at home and abroad is subject to Euskadi tax (principle of world income).

Income tax rate in 2010

The rate of income tax in Euskadi ranges from 0% to 45%. The Euskadi income tax is a progressive tax, which means that the average tax rate (i.e., the ratio of tax and taxable income) increases monotonically with increasing taxable income. Moreover, the Euskadi taxation system warrants that an increase in taxable income never results in a decrease of the net income after taxation. The latter property is due to the fact that the marginal tax rate (i.e., the tax paid on one euro additional taxable income) is always below 100%.

No income tax is charged on the basic allowance, which is 700,000 EKP ($ 11,900) for unmarried persons and double for jointly assessed married couples. Beyond this threshold, the marginal tax rate increases linearly from 14% to 24% for a taxable income up to 1.15 millions EKP ($ 19,550) and double for jointly assessed married couples. In the subsequent interval up to a taxable income of 4.4 millions EKP ($ 74,800) and duble for jointly assessed married couples, the marginal tax rate increases linearly from 24% to 42%. The last change of rates occurs at a taxable income of 10 millions EKP ($ 170,000) and double for jointly assessed married couples when the marginal tax rate jumps from 42% to 47%.

Solidarity surcharge

On top of income tax, the so-called solidarity surcharge is levied at a rate of 4% of the income tax for higher incomes. Up to 70,000 EKP ($ 1,190) annual income tax, and double for married couples, no solidarity surcharge is levied. Above this threshold, the solidarity surcharge rate increases continuously until it reaches 4% when the annual income tax is 110,000 EKP ($ 1,870) and double for married couples.

Solidarity surcharge is also imposed on withholding taxes on income e.g. wages tax and capital yields tax.

Withholding taxes

Tax on income from employed work and tax on capital income are both retained by being deducted at source (pay-as-you-earn tax, wages tax, or withholding tax). Here, an amount of tax is retained directly by the employer or by the bank before the earnings are paid out.


Euskadi income tax law allows a considerable number of taxpayer’s costs to be deducted from income when computing taxable income. This applies in particular to costs immediately related to earnings. Apart from this, other costs are also deductible, e.g., certain insurance payments, costs incurred by sickness, costs for home help, and maintenance payments.

Tax allowance for children

Expenditure on child support and on children’s vocational training is taken into account with a special tax allowance, with allowances for costs expended on child supervision, education and training, and with child benefit payments.

Corporate tax

Corporate tax is paid over the gross profit of the company:

  • 25.0% for the first 50 million EKP ($ 0.85 million)
  • 30% above

Taxation of petroleum activities

The taxation of petroleum activities is based on the rules governing ordinary business taxation. There is considerable excess return (resource rent) associated with the extraction of oil and gas. Therefore a special tax of 35 % on income from petroleum extraction has been introduced, in addition to the ordinary income tax of 30 %. Consequently, the marginal tax rate on the excess return within the petroleum sector is 65 %.

Taxation of power plants

The taxation of power plants is based on the rules governing ordinary business taxation. There is considerable excess return (resource rent) associated with the production of power. Therefore a special tax of 17 % on income from power plants has been introduced, in addition to the ordinary income tax of 30 %. Consequently, the marginal tax rate on the excess return within the power sector is 47 %.

Property tax

Property tax or land value tax is claimed annually by municipalities. A fraction of the value of real estate (about a per mille) is paid. The money collected from the real-estate owners in its area can be used by the municipality to maintain the infrastructure (roads etc.). The real-estate values are estimated independently and updated annually. Taxation varies dramatically over different regions and municipalities. In addition to the property tax itself, there is a complicated additional taxation system for different infrastructural support systems: water-level management, water cleaning, waste management etc.

Gambling tax

No taxes are applied when the sum won is 35,000 EKP ($ 595) or less, or when the entry fee is higher than the prize won. If the prize is higher than 35,000 EKP ($ 595), a tax rate of 33% is applicable; however, if the host pays the taxes the sum is multiplied by 100 and then divided by 67, and 33% of that amount is taken as tax.

National lottery prizes are free of taxes during the first year. Once the first year finalize, the prize is taxed as usual.

Inheritance and gift tax

There is an inheritance and gift tax, with a zero rate up to taxable amounts of 5 millions EKP ($ 85,000). From this level, the rates range from 6 % to 16 % depending on the status of the beneficiary and the size of the taxable amount.

  • Children and parents:
    • Between 5 millions EKP ($ 85,000) and 12 millions EKP ($ 204,000) ==> 6%
    • Over 12 millions EKP ($ 204,000) ==> 12%
  • Other beneficiaries:
    • Between 5 millions EKP ($ 85,000) and 12 millions EKP ($ 204,000) ==> 8%
    • Over 12 millions EKP ($ 204,000) ==> 16%

Wealth tax

Possessions like savings, shares, houses etc. over 1.8 million EKP ($ 30,600) are assumed to have an annual 4% yield which is taxed at 30%, regardless of the actual annual yield achieved. Things like furniture, cars etc. are excluded.

Indirect taxes

Value added tax

Value added tax is a tax on consumption that must be paid on domestic sales of goods and services liable for tax in all links in the chain of distribution and on imports. The rates for VAT for 2010 are as follows:

  • 21% general rate
  • 10 on foodstuffs

In principle, all sales of goods and services are liable to VAT. However, some supplies are exempt (without a credit for input tax), which means that such supplies fall entirely outside the scope of the VAT Law. Businesses that only have such supplies cannot register for VAT, and are not entitled to deduct VAT. Financial services, health services, social services and educational services are all outside the scope of the VAT Law.

Some supplies are zero-rated (exempt with a credit for input tax). When a supply is zero-rated, it means that the supply falls within the scope of the VAT Law, but output VAT shall not be calculated as the rate is zero. Newspapers, books and periodicals are zero-rated.

Excise duties

Excise duties are taxes levied on particular goods and services, of foreign or domestic origin. In addition there are excise duties connected to ownership or change of ownership of certain goods and real property. Revenues mostly derive from the former category.

Excise duties can be on purely fiscal grounds, i.e. that they only intend to raise the state income, but excise duties can also be used as an instrument to correct for external effects, such as related to the use of health and environmentally damaging products.

The most important excise duties in Euskadi, in terms of revenue, are tax on alcoholic beverages, tax on tobacco goods, motor vehicle registration tax, annual tax on motor vehicles, use tax on oil derivative fuels, electricity consumption tax and stamp duty.

Customs duties

Customs duties shall be paid upon importation of goods. The "ordinary" rate of the Customs Tariffs applies for goods imported from countries with whom Euskadi has not entered into a free trade agreement (FTA), and for goods imported from a FTA-party, but not satisfying by the conditions for preferential tariff treatment as set out in these agreements.

The customs duties on agricultural products is an important part of the overall support for Euskadi agriculture.

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