The Basque Country's tax and finance system, derived from the historic rights of the "Territorios Forales" or areas with special rights, has its own characteristics.

Its singular nature, recognised in Additional Provision One of the Constitution, is set forth in the Statute of Autonomy, which establishes that taxation and financial relationships between Spain and the Basque Country shall be regulated by the traditional "foral" system in the form of an Economic Agreement or Convention.
 
The current Economic Agreement (Act 12/2002, 23 May, BOE 24/05/2002), includes, in Chapter I, aspects corresponding to the taxation relationship, with Chapter II dedicated to financial relationships.

The Basque tax system

Under the Economic Agreement , the Basque Country has its owntax system with most of the powers to regulate and manage taxes usuallyavailable to countries with a Treasury system. The Agreement also includesa set of regulations that guarantee harmonisation between the Basque taxsystem and those in the rest of Spain.

The Basque Country's competencies in tax matterslie essentially with the governing bodies of the three historic provinces,Alava, Bizkaia and Guipúzcoa. However, it is in fact up to the BasqueParliament to approve the regulations on tax coordination, harmonisationand collaboration. A particularly important Act of Parliament, passed in1989, developed these principles and created the Basque Tax Coordination Agency , (OCTE), withrepresentation on the Provincial Councils and in the Basque Government,and whose mission is to promote coordination, collaboration and harmonisationof the tax system of the Basque Country's three historic provinces.

All taxes levied under the Basque system are managedand collected by the Foral (provincial) Treasuries as stipulated in theEconomic Agreement.

As far as direct taxation is concerned,the Basque Country has its own IRPF or IncomeTax, and its own Company of Corporation Tax  , as well as its own wealth and capital transfer taxes.

Two major indirect taxes, Value Added Tax and Special Taxes, are almost completely harmonised, in linewith the European Union as a whole, and the powers of the Foral, or Provincial,Treasuries are limited to specific aspects of managing these taxes. TheBasque institutions are largely free to regulate the third major indirecttax, Capital Transfer Tax and Stamp Duty.

The revenues from the collection of what are known as coordinated, or agreed, taxes gives a good idea oftheir importance to tax policy as a whole.

The Basque Country's Finance System

The main feature of the Basque Country's finance system is its capacity to collect almost all taxes making up the tax system itself, contributing towards financing Spanish State expenditure on matters where competences have not been transferred to Basque Country institutions. This contribution by the Basque Country to the State is called the Quota.

Chapter II of the Economic Agreement regulates Financial Relationships with the Spanish State, which are governed by the following general principles:

1. Fiscal and financial autonomy of Basque Country institutions.
2. Respect for solidarity.
3. Co-ordination and co-operation with the State over budget stability.
4. Contribution by the Basque Country to State expenses not assumed by the Autonomous Community.
5. Financial supervision of local authorities corresponds to Basque Country institutions.

Concerning the calculation of the Quota, the Economic Agreement provides that the method for indicating it should be established by an Act of Parliament every five years.
So, Act 13/2002 of 23 May 2002 approved the method of indicating the quota for the five-year period 2002-2006.