You live in Spain and receive pension from Finland

When living in Spain and having income from Finland in the form of a pension, you pay tax to Finland and also to Spain. When you submit your tax return in Finland, give full details on the taxes you paid to the Spanish tax authority. When the Finnish Tax Administration assesses your taxes for the year, the taxes paid to Spain become creditable. This means that you need not pay any double tax.

The standard way to deal with double taxation is that the country eliminating it is the one where you live and are a tax resident of. Exceptionally, however, the tax treaty with Spain states that double taxation on a pension should be eliminated in the country of the payor. The fiscal method used with Spain is called ‘reverse credit’.

Pension listed below are different from the above

• Pensions you receive based on past employment in the public sector. Tax is payable in both countries. However, the country that eliminates double taxation is Spain, not Finland.
• Pensions from a motor insurance or other risk insurance contract. If you receive a pension of this type, you pay income tax to Spain only.

Do you have plans for moving to Spain?

The assessment of your taxes in Finland is carried out in such a way that after you have paid taxes to Spain, the paid amounts can become creditable to your benefit on the condition that you move to Spain permanently or you already live there on a permanent basis.

The authorities would generally consider your residence in Spain to be permanent if you no longer have a home in Finland. If you still have a living accommodation in Finland and you stay in Finland a lot, it will be more complicated to determine whether or not you have left Finland permanently as referred to in the relevant legal provisions.  In these circumstances, every individual taxpayer’s facts and circumstances need to be examined from the entire perspective. After that, we can determine the pension recipient’s country of residence within the meaning of the tax treaty.

The taxes you paid to Spain can be taken into account in your Finnish taxation if:

• You gave information to the Tax Administration in sufficient detail concerning your departure from Finland.
• You submitted a “Notification of move” (to the DVV, the Digital and Population Data Services Agency) to live in Spain permanently.
• You have a permanent place of residence in Spain.
• You are deemed by the Spanish tax authority to be a resident of Spain within the meaning of the tax treaty.  Because you are treated as a Spanish tax resident, your other income from Finland may also be taxed in Spain. 

Request a new tax card for your pension income

If you prefer to have a Finnish tax card where the withholding rate is lower because of the crediting of your tax payments to Spain, you need to provide the Tax Administration with an estimate of your total annual Spanish tax.

Go to MyTax

Instructions: How to request a tax card for pension income in MyTax. Enter the estimated Spanish tax for the year at the Pre-completed income and deductions stage in MyTax, under Wages, pensions and benefits, or alternatively under Non-resident’s pensions and payments. First, answer Yes to “Do you pay taxes to another country on a pension you receive from Finland?” Then, enter the estimated Spanish tax.

If you submit your request for a new tax card on paper, use Form 6207a: “Application for a tax-at-source card/tax card – Individuals who leave Finland or are living in a foreign country” – Lähdeverokortti- tai verokorttihakemus, (available in Finnish and Swedish)

Enter your estimated Spanish tax under “Credit for taxes paid to foreign countries (reverse credit)”.

Required documents to be enclosed with the tax-card request where you include your Spanish tax for the first time:

• Documentation issued by the Spanish tax authority about your liability to pay tax on your worldwide income to Spain (a certificate of residence).
• Proof of your having a permanent home in Spain, such as a scanned copy or photocopy of a contract of purchase or of a rental contract.
• Proof or a written account making it clear that you no longer have a home in Finland. Acceptable proof would be a photocopy of the contract of sale, a statement showing that you have given notice on your rental contract, or a written account stating that you have rented out the apartment you own and where you used to live in.

After you submit a request for a tax card for pensions for the first time, the Tax Administration will automatically send information on your valid withholding rate to the payor of your pension every year. Accordingly, it will not be necessary for you to request a new card for the future years. However, we recommend that you ensure that the amount of your taxes paid to Spain is exact. To check the amount that we have on record, look it up on your tax prepayment decision (ennakkoperinnän päätös; beslut om förskottsskatt). You can find the decision in MyTax: Go to the Communication tab. Under Decisions and letters, click Open decisions and letters. After you have made this check, you can request a change to your tax card if necessary.

How to determine the part of the Spanish tax you paid which will be treated as an income tax for the Finnish pension

If you pay Spanish tax on other items of income subject to tax in Spain, i.e. not only on your Finnish pension, it is important that you determine the size of the part connected to the pension from the Finnish payor. This means that you need to figure out the amount of Spanish tax for which your Finnish pension is the base. When you make the calculations, you need to first include all your income subject to tax in Spain, and then subtract all the expenses supporting that income.

Example:  You receive a €20,000 pension from a payor in Finland based on your past employment in the private sector. Your other income subject to tax in Spain amounts to €31,000 a year. You paid €1,000 in deductible expenses for the production of the income.  You pay a total of €15,000 of tax to Spain.

The Spanish tax on the pension from a Finnish payor is calculated as follows:
Divide the Finnish pension (€20, 000) by the sum of all income subjected to Spanish taxes (€20,000 + €31, 000 = €51, 000), however, you need to subtract €1,000 from it (the deductible expenses for the production of income).
Multiply the result by the total amount of tax paid to Spain, i.e. by €15,000.
€20,000 / (€51, 000 – €1,000) × €15, 000 = €6,000 

Accordingly, €6,000 out of your tax payment to Spain is based on your Finnish-source pension.

Check your pre-completed tax return

Check the amounts of your income sourced to Finland and check your tax-deductions, as well. The pension insurance company submits reports to the Incomes Register detailing the pensions the company pays out. This way, the information recorded in the Incomes Register becomes available to the Tax Administration and is pre-filled on your pre-completed return.  In particular, we recommend that you check the amount of tax paid to Spain.

Go to MyTax

Instructions: The pre-completed tax return – making corrections in MyTax or on paper, sub‑heading Pensions reportable by the payor to the Incomes Register, and subject to earned‑income taxes: see passage Pension income and taxes paid abroad (reverse credit).

Note: We recommend that you re-check the amount of Spanish tax once again later. It is advisable to wait until the final amount is recorded, then re-check it. If you need to make corrections to the amount of your Spanish tax, please verify whether the Tax Administration has completed the assessment process of your taxes for the year. Read the tax decision to find out the date when the Tax Administration completes the assessment. How to find the decision in MyTax. If the assessment process is still ongoing, please follow the instructions of the pre-completed tax return and make the corrections as soon as you can. If there are delays with these corrections and the assessment has ended already, you will need to make a formal claim for adjustment in order to remedy any errors.

Read more about the tax return and its deadline dates

You pay a healthcare contribution to Finland

In general, even when you live in Spain on a permanent basis, Finland pays reimbursements to Spain relating to your medical expenses. Because of this, you must pay the insured person’s healthcare contribution to Finland. Its amount is less than 2% of the pension. Reimbursement of medical costs is governed by EU regulations on social security. The contribution’s amount is included in the calculation of the tax withholding rate on your Finnish tax card.

The tax treaty between Finland and Spain changed in 2019

The tax treaty between Finland and Spain was signed in 2019 and is currently in force. In comparison with the previous Spain–Finland treaty, the provisions of the 2019 treaty introduced a changed tax treatment with regard to Finnish-sourced pensions from the private sector. As of 2022, these pensions are taxed in Finland.

Exceptionally, however, the current treaty lays down that double taxation on a pension should be eliminated in the country where the payor of the pension is. (This is called ‘reverse crediting’.) 

Read more about how income taxes are imposed on pensions sourced to Finland: “Taxation of pensions in cross-border circumstances” – Eläketulojen verotus kansainvälisissä tilanteissa (available in Finnish and Swedish, link to Finnish), section 6.3 The taxation process in Finland - 6.3.3.2 The transition rule during three years (2019-2021).