Taxation of International Pensions

As of 2006, the Finnish pensions of persons who live abroad permanently, that is, who have a limited tax-paying liability, are taxed in the same way as the pensions of persons who live in Finland. The tax rate, deductions and tax return procedure are the same as for persons who live in Finland.

Earlier, persons who lived abroad had to pay a tax at source of 35 per cent. All taxes of retirees who live abroad, including the calculated municipal tax according to the average municipal tax rate, go to the State.

In some cases, based on a tax treaty between Finland and the country in which the person lives, the pension is not taxed in Finland at all but only in the country in which the pensioner lives.

A pension from abroad has often been taxed in the country from which it is paid. In that case, no income tax is deducted in Finland, but the pension increases the tax rate on income from Finland. Pensions from certain countries are not taxed in the foreign country. In such cases, Finland taxes the pensions as pensions paid in Finland.

The tax treatment of the pension from a specific country is determined by the tax treaty between Finland and the country in question to prevent double taxation. Finland has concluded such treaties with more than 60 countries. Foreign pensions are often subject to the insured’s contribution for medical care insurance in Finland.

 

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