Basque Country Tax Deductions Guide 2025: Youth Housing and EPSV

The Basque Country has its own tax system managed by the Foral Tax Offices of Álava, Bizkaia, and Gipuzkoa. For the 2025 Income Tax season, a fiscal review has been approved that focuses on facilitating access to housing for young people and adapting the tax to new work realities such as teleworking.

Housing: The Great Basque Fiscal Attraction

The Basque Country remains one of the few territories in Spain that maintains powerful deductions for the purchase of a main residence:

1. Main Residence Acquisition

• ✅ General Deduction: 18% of the amounts invested during the year.
• ✅ Youth (< 36 years): The deduction increases to 23%. As a major new feature for 2025, the annual maximum limit in the year of purchase is removed for this group, allowing for massive initial savings.
• ✅ Family Donations: Donations of up to €30,000 from family members intended for the purchase of a home for young people are tax-exempt.

Savings and Social Welfare (EPSV)

Voluntary Social Welfare Entities (EPSV) are the pillar of savings in the Basque Country:

• ✅ Reduction Limit: Up to €5,000 per year between own contributions and employer contributions.
• ✅ Youth Incentive: Those under 36 enjoy an additional incentive of 25% on their contributions, encouraging long-term savings from an early age.

New Realities: Teleworking and Digitalization

Basque regulations adapt to the digital age with specific measures for 2025:

Concept	Deduction / Benefit	Notes
Teleworking	Expense Exemption	Compensations for equipment and tools are not taxed
Sustainable Mobility	15% investment	In electric vehicles and bicycles (depending on territory)
Children and Family	Fixed deduction	For each descendant based on order and age
Elderly Care	Fixed deduction	For ascendants living with the taxpayer

Critical Requirements in the Basque Country

1. Territoriality: Although the rules are similar, there are slight differences between Álava, Bizkaia, and Gipuzkoa. Be sure to consult the specific regulations of your historic territory.
2. Home Use: To apply the purchase deduction, the home must be your habitual and effective residence for at least 10 years.
3. EPSV Proof: Ensure your financial entity issues the contribution certificate before filing your return.

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Frequently Asked Questions (FAQ)

Does the home purchase deduction apply to second-hand houses?

Yes, the 18% deduction (or 23% for youth) applies to both new and second-hand housing, provided it is used as a habitual residence.

What teleworking expenses are exempt?

Typically included are compensation for the use of a computer, internet connection, and ergonomic furniture that the company pays to the worker, always within reasonable market limits.

Can I apply for the EPSV deduction if I live in Madrid but work for a Basque company?

No, the EPSV deduction is exclusive to tax residents in the Basque Country. If you reside in Madrid, you would apply the state regulations for pension plans.