Spain Gazettes a Law to Amend the Basque Economic Agreement for Global Minimum Tax Provisions

Law 3/2025, of 29 April, was published in the Spanish Official State Gazette on April 30, 2025. This amends Law 12/2002, of 23 May, approving the Economic Agreement with the Autonomous Community of the Basque Country and includes a new Article 20bis for the application of the Pillar 2 Global Minimum Tax, previously enacted in Spain in Law No. 7/2024 of December 20, 2024. The provisions apply from May 1, 2025.

The changes to the Economic Agreement are principally to determine where the GMT provisions are applied and the tax is filed/paid.

This is in part dependent on the location of the Substitute Taxpayer,. Under Law 7/2024, the Substitute Taxpayer is determined as the following:

-The UPE when it is located in Spanish territory; or

-The parent entity located in Spanish territory whose net book value of tangible assets is the highest among the group’s parent entities located in Spanish territory; or

-The constituent entity of the group located in Spanish territory whose net book value of tangible assets is the highest among the constituent entities of the group that are located in Spanish territory.

The Minimum Tax is a tax of the Basque region for taxpayers who are part of a multinational or large domestic group where the substitute taxpayer (as defined in Law 7/2024) is subject to the Basque regulations on Corporation Income Tax (or, where appropriate non-resident income tax (IRNR) for permanent establishments), when the group has two tax consolidation groups in Spain that apply both the Basque and Spanish regulations.

However, when taxpayers who are part of a multinational or large domestic group do not have two tax groups subject to the Basque and Spanish tax consolidation regimes (because there is no tax group in Spain or because, if there is, the tax group applies the tax regulations of a single territory, and the rest of the companies -or only one company- are taxed under the regimes of other territories):

-the Basque regulations will apply when the substitute taxpayer has its tax residence in the Basque Country; and

-the Spanish regulations will apply when the substitute taxpayer has its tax residence in Spain.

There is a specific rule for groups whose volume of operations has exceeded 12 million euros in the previous year. In this case, the tax residence of the substitute taxpayer will be taken into account, unless the volume of operations carried out in the other territory exceeds 75% of the total. In that  case, the regulations of the territory in which 75% or more of the operations have been carried out will apply.

This mirrors Article 14 of the Economic Agreement which applies a similar provision for corporate income tax purposes

The substitute taxpayer will file the self-assessment of the global minimum tax and pay the tax to the Spanish State Administration or the Basque State Administration based on the rules established for the levy of Corporation Tax (or for the IRNR for permanent establishments).

In general, if the fiscal domicile is in the Basque region, the tax is paid to the Basque competent authority if turnover in the previous year did not exceed 12 million euros.

If turnover exceeds this then the tax is paid according to Article 15 of the Economic Agreement and, irrespective of tax residence, the tax is paid to both the Basque and Spanish State Administration in proportion to the volume of operations carried out in each territory during the year.