Roundup: Tax exemption offered by Portugal to new foreign pensioners offends Finland

A relatively small number of Finnish pensioners who have moved to Portugal in recent years have become a nation-wide hot political issue in Finland, a Nordic country known for its high morale in tax payment.

In 2013 Portugal promised a ten-year exemption of taxation to foreign pensioners moving in. Thus new foreign pensioners taking up residence in Portugal would pay no tax on pensions sent from their mother countries.

While the total number of Finnish pensioners who have responded to the call is only around 200, among the group are some wealthy retirees with annual pensions well over half a million euros.

Local media has estimated that Finland has lost millions of euros and the amount would increase due to the recent high-end emigration.

Finland cannot prevent its citizens from leaving the country, and pensions will be transferred to the locations where pensioners have chosen to live in.

Finland withholds tax if the retiree is only a temporary resident abroad, but for long term emigrants it can be the receiving country that levies the income tax.

Spain has so far been the most popular country to move to, with tens of thousands of Finnish retirees living there at least part of the year. Finland is currently negotiating on the taxation issue also with Spain but problems are not that huge as with Portugal.

Though reported already in 2013, the Portuguese offer became national news again last week as the media published pension details of some newly retired executives who moved to Portugal. The situation baffled the Finnish government as austerity measures have been targeting pensioners in Finland.

Figures showed that those moving to Portugal are mainly middle class Finns who retire from professional careers.

The Finnish Centre for Pensions reports that the average Finnish pension transferred to Portugal per month was nearly 3,500 euros last year, whereas the average pension paid to residents in Finland was only 1,588 euros per month, both figures before tax.

Finnish Prime Minister Juha Sipila over the weekend called the Portugal decision "a loophole" and pledged it would be ended soon.

Finland is now uncompromising on the issue. Prime Minister Sipila said the whole taxation agreement between Finland and Portugal could be terminated, if a solution is not found.

In one way or another, Finland would start to introduce some form of taxation from the beginning of 2017, local media said.

The business daily Kauppalehti reported that Finland is currently losing about two million euros annually in tax revenue due to the no-taxes-policy in Portugal.

The newspaper had interviewed Portugal-based Finnish entrepreneur Teppo Raitis, who offers assistance to new arrivals. He deplored that "a psychosis of envy" prevails in Finland.

He maintained that Portugal would remain attractive even if Finland would start taxing the pensions. "Here pensioners can enjoy the sun and lower prices".

Both Finland and Portugal belong to the European Union, but income taxation issues are subject to national decisions. Endit