Reform of the Economic Agreement between the State and Navarre

Automatic summary, not yet reviewed

1. The law approves the reform of the Economic Agreement between the State and the Foral Community of Navarre, agreed by both administrations on January 22, 2003. The full text of the amended agreement is included as an annex to the law.
2. The reform responds to two recent changes in the state tax system: fiscal co-responsibility of the common-regime autonomous communities and the creation of the tax on retail sales of certain hydrocarbons.
3. Navarre keeps the power to maintain, establish and regulate its own tax system, but must respect harmonization with the state's general system, international treaties, European Union rules and the principle of solidarity.
4. The agreement details which taxes Navarre collects and under what criteria: personal income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings., wealth tax, corporate tax, non-resident income tax, inheritance and gift tax, VAT, special taxes, hydrocarbons, insurance premiums, transfer tax and gambling taxes, among others.
5. Companies with their tax domicile in Navarre and a turnover of up to six million euros pay taxes only to Navarre. Those above that figure operating in both territories pay both administrations in proportion to their turnover.
6. Navarre pays the State an annual contribution to fund general expenses it does not take on. It is calculated by applying an imputation index, based mainly on Navarre's relative income, and updated every five years.
7. A three-member Arbitral Board is created to resolve conflicts between administrations over applying the agreement, including disputes over taxpayers' tax domicile. Its decisions can only be appealed before the Supreme Court through the administrative litigation route.
8. A Coordinating Commission is also created, with six representatives from each administration, meeting at least twice a year to study how the foral system fits into the state tax framework, answer queries and set the economic contribution.

Who it affects

• People who live or work in Navarre: They pay their taxes (income, wealth, inheritance, VAT and others) to Navarre's treasury under the rules of this agreement.
• Companies with tax domicile in Navarre: They pay taxes to Navarre or to both administrations at once, depending on their turnover and where they do business.
• Local entities of Navarre: They collect their local taxes and share in state revenue for taxes not collected by the Foral Community.
• The State and the Foral Community of Navarre: They must coordinate, split tax revenue and settle disputes through the Arbitral Board and the Coordinating Commission.

Words worth knowing

Convenio Económico (Economic Agreement)

Agreement between the State and Navarre that sets how Navarre collects taxes and how much it pays the State for expenses the State keeps.

Régimen foral (foral regime)

Navarre's own system that lets it have and manage its own taxes within limits agreed with the State.

Punto de conexión (connecting factor)

Criterion that decides which administration may collect a tax, for example where the person lives or where the transaction takes place.

Aportación líquida (net contribution)

Annual amount Navarre pays the State to help fund general expenses the Foral Community does not manage.

Volumen de operaciones (turnover)

Total amount a company bills for selling goods or providing services, excluding VAT.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

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