I. Background Between 1993 and 1999, the Territorios Históricos of Álava, Guipúzcoa and Vicaya, adopted respectively three main tax incentives: 1) A tax credit of 25% for investments and a tax exemption on corporate income taxation for new undertakings for the first ten years – the “Basque tax holidays”– if the corporation was created with a certain capital invested in new fixed assets and also created new jobs; 2) A tax credit of 45% of the amount of