Finnish pensioners have been able to cash out their pensions tax free in Portugal since the signing of a tax treaty between the two countries in 1970.
The Finnish government has called for the nullification of its bilateral tax treaty with Portugal.
“The tax treaty between Finland and Portugal [...] is inconsistent with the notion of fairness regarding [the] taxation of pensions. This is why the government is proposing that the treaty be terminated from the start of 2019,” explains Petteri Orpo (NCP), the Minister of Finance.
Signed in 1970, the much-criticised treaty has effectively enabled pensioners to cash out their private-sector pensions tax free in Portugal. Finnish pensioners residing in the country currently receive an average pension of over 3,700 euros a month, a sum that is roughly 350 euros higher than the average earnings of Finns in 2016.
Finland has sought to renew the tax treaty for some time. A new treaty between the two countries was signed in 2016, but it has yet to even be submitted to the Portuguese Parliament.
Orpo on Thursday revealed in a press release that the negotiations were carried out in a “co-operative spirit” and expressed his hope that the agreement will be adopted in a timely manner to ensure a new treaty is in place after the old one has been terminated.
If Portugal fails to adopt the treaty by the beginning of 2019, the tax treatment of pensions paid to the country would be determined by the legislation of Finland, according to the press release. The Finnish government would thereby have the right to levy taxes on pensions paid to its citizens residing in Portugal.
“Finland could therefore tax, in accordance with Finnish national legislation, income received from Portugal by a resident of Finland and income received from Finland by a resident of Portugal,” the press release reads.
Aleksi Teivainen – HT Photo: Jussi Nukari – Lehtikuva Source: Uusi Suomi
