Finnish pensioners in Portugal lose tax free status

Paul Rees 25 May 2018

Finland has torn up its tax treaty with Portugal, stripping expatriate Finnish pensioners of their tax free status.

The tax agreement prevented a Finnish citizen from being taxed twice on the same income but ran into trouble when Finland realised its pensioners living in Portugal were not being taxed at all.

“Finland has had it up to here with this issue,” said MP Olavi Ala-Nissilä in parliament on Wednesday.

“The main objective of both the government and the legislative proposal is that Finland will terminate the tax agreement, putting an end to the tax exemptions of certain well-off pensioners (living in Portugal).”

Finland's Finance Committee previously had expressed its unanimous support for the exceptional proposal and MPs voted to scrap the tax treaty that was signed in 1970 and has been in force since 1971.

The treaty sought to avoid situations where a Finn can be taxed twice on the same income but the problem arose when this agreement conflicted with the launch in Portugal, almost ten years ago, of a scheme which allows pensioners from other countries not to pay IRS in Portugal.

Finnish pressure on the Portuguese government begun in April this year when Helsinki insisted that a new bilateral agreement be signed, to prevent those Finnish citizens living in Portugal from paying local income tax – at a zero tax rate.

In 2017, there were precisely 500 Finnish pensioners living in Portugal, attracted by the zero tax rate on their pensions.

Comments

0 #14 Gavin Scott 2018-06-04 09:35

Quoting Comet:

I was under the impression that no country in the E.U could discriminate against another E.U. states citizens,
i.e. Freedom from discrimination on nationality: a right not to be discriminated against on grounds of nationality within the scope of application of the Treaty (Article 18);

The Portuguese government is obviously discriminating against its own Portuguese citizens because they do not have the option of not paying tax on their pensions but I don't know if the above legislation applies to a countries own citizens but Portugal is also discriminating against any E.U. citizen who came to Portugal and then started paying tax on their pension before this tax free pension legislation was introduced, how can it be legal to discriminate against one E.U. pensioner by taxing them on their pension but not to tax another E.U. pensioner because they arrived at a later date, the earlier arrival is most obviously being discriminated against.

There is no discrimination against the Portuguese as anyone who has not been a tax resident of Portugal in the previous 5 years may apply.

With the free movement of people, capital, goods and services throughout the EU it is left to member to states to set their own tax policy.
Portugal has a naturally declining population and needs to attract immigrants by creating an attractive economic environment.
Without an independent currency, tax legislation is one of the few tools available to achieve this.

+1 #13 Frustrated 2018-05-29 22:52

Finland has taxed on source already with the old treaty for pensions from public sector and pensions for entrepenoures. What happens now with no double taxation treaty at all is a total mess, with potential double taxation of capital income. Total stupidity.

0 #12 Alfred Koolen 2018-05-28 12:17

Having settled in the Algarve and coming from one of the countries in the Dutch Kingdom in the Caribbean, I can let you know that all our state and company pensions are taxed in our former country because Portugal is not taxing them. Because the little island is, unjustifiable, blacklisted we also pay 35%, instead of 25%, capital gains and dividend tax. The NHR status we have is useless. Rightfully so as far as I am concerned. Taxes have got to be paid by all.

+11 #11 Seppo 2018-05-27 16:53

Finns are not the only foreign EU citizens who are exempt from tax on their pensions at source. Portuguese government with NHR program granting 10 year 0-tax on pension income made clever decision so attracting us pensioners to come and spend our (tax) and other savings on local economy creating taxable income to local businesses. Of course, Portuguese government could tax these pensions taking the money to Lisbon, I rather spend it in Algarve businesses and buying local services. Once Finland and other EU countries (Sweden, France, Netherlands etc.) start taxing pensions at source that money is away from Portugal and instead funding public services in those countries where pensioners are not benefiting those services. I rather spend or pay the money here in Portugal.

+2 #10 Two.Sugars.in.my.tea 2018-05-27 14:38

Quoting Dolphie:

The Swedes will be next!

& long overdue...

+2 #9 Ralph Evans 2018-05-27 12:04

Judging by the red thumbs down on critical comments reference the E.U. by Cicero and Alpho, the E.U. propaganda unit at Berlaymont must have someone keeping their eye on the Algarve Daily News website.

0 #8 Alpho 2018-05-26 19:48

I am not a political person but I am at a loss to understand why the E.U should be interfering in the elections of a member state because first and foremost Italy is an independent democratic country and secondly it is a member of the E.U., I would think that the first is far more important than the second.

+2 #7 Cicero 2018-05-26 17:29

When will all the people out there get it into their heads that the E.U. is not about citizens rights, it's about control by a self perpetuating unelected elite, just ask the ordinary Greek citizens who had their bank accounts and pensions stolen by the E.U. when Greece had its debt crisis, a crisis caused by the E.U. accepting Greece into the euro knowing full well that the governments books bore no resemblance to the true state of the Greek economy, having been well and truly cooked for the occasion by Goldman Sachs.

The Greeks and the Italians have used currency devaluation as a get out of jail card forever but as soon as they were locked into the proxy Deutsche mark called the euro, they were obviously heading for disaster and anyone with two joined up brain cells knew it.

I await the outcome of the E.U. threats to Italy after the recent "DEMOCRATIC" elections didn't go the way the E.U. elite wanted, they will inevitably attempt to change the rules to prevent the Italian "citizens" choice running the country but any attempt to steal the bank accounts from 60 million Italians will possibly present a bit more of a problem than Greece did.

0 #6 Ed 2018-05-26 16:37

Quoting Comet:

I was under the impression that no country in the E.U could discriminate against another E.U. states citizens,
i.e. Freedom from discrimination on nationality: a right not to be discriminated against on grounds of nationality within the scope of application of the Treaty (Article 18);

The Portuguese government is obviously discriminating against its own Portuguese citizens because they do not have the option of not paying tax on their pensions but I don't know if the above legislation applies to a countries own citizens but Portugal is also discriminating against any E.U. citizen who came to Portugal and then started paying tax on their pension before this tax free pension legislation was introduced, how can it be legal to discriminate against one E.U. pensioner by taxing them on their pension but not to tax another E.U. pensioner because they arrived at a later date, the earlier arrival is most obviously being discriminated against.

That's it, in a nutshell. The NHR and Golden Visa schemes afford certain foreigners a tax free life in Portugal while the rest of us pay for the roads, hospitals and teachers.

0 #5 Ed 2018-05-26 16:34

Quoting Dennis.P:

Ed: Does this mean the Finns are the first EU state to take action or are other EU countries taxing their pensioners at source?
That said - It does shine the spotlight back on the as yet unaddressed absurdity that the Greco-Romans never intended allowing an incoming EU member their full rights. So not just taking in hordes who move south and wait, in the sun as is their Right, for death or incapacity - but, for younger folk, the Right of "Effective Occupation". Earning a living, with the full support (not obstruction) of the authorities, in their new country of residence.

The UK taxes at source the pensions of former state employees doctors, nurses, teachers and others.

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