You live in Spain and receive pension from Finland
A new tax treaty was concluded between Finland and Spain, and it has been applied as of 1 January 2019. The tax treaty provides that if you receive pension from Finland, you must pay tax to Finland even if you live in Spain.
However, a 3-year transition period was agreed to apply to pension income received from the private sector in 2019–2021. During the period, pension recipients did not have to pay tax to Finland. Starting 1 January 2022, you must also pay tax to Finland on earnings-related pension received from the private sector.
However, pension based on motor liability insurance or other such risk insurance will be taxed in Spain only.
Tax paid to Spain is deducted from tax imposed in Finland
In general, tax treaties contain an agreement that if double taxation occurs, it will be eliminated by the individual’s country of residence. Exceptionally, however, the tax treaty with Spain states that double taxation on pension income will be eliminated in the country of source. This is called reverse credit.
If you live in Spain but receive Finnish pension on which you must pay tax to Finland, the tax you have paid on the pension to Spain will be credited to you in your taxation in Finland.
If you not only receive pension from Finland but also other income, which is subject to Spanish taxes, you can figure out the Spanish tax amount directed toward your pension from Finland if you perform a calculation reflecting its proportional part. The calculation must contain the income subject to Spanish tax, taking account of the tax-deductible expenses that support the income.
Example: You receive €20,000 in pension income from Finland based on your past employment in the private sector. Your other income taxable in Spain amounts to €31,000 a year; and you also have paid €1,000 in deductible expenses for the production of income. You pay a total of €15,000 of tax to Spain. The Spanish tax on the pension, paid to you from a Finnish source and based on past employment in the private sector, is calculated as follows:
The pension from Finland (€20,000) must first be divided by the total amount of all income subject to Spanish taxes €51,000 (= €20,000 + €31,000), subtracting the expenses for the production of income (-€1,000). Multiply the result by the amount of tax paid to Spain (€15,000).
20,000 / (51,000-1,000) × 15,000 = 6,000
The Spanish tax on the earnings-related pension from the private sector paid to you from Finland is thus €6,000.
Note: However, double taxation of pension income from the public sector is normally eliminated in the country of residence, i.e. Spain.
Tax cards for 2023
In December or January, you will receive information about your tax card by post. Please check that the information is correct.
If you also pay tax on your pension income to your country of residence, i.e. Spain, the tax you pay to Spain can be taken into account; so it may reduce your Finnish tax-withholding rate in 2023. Please check the exact amount of tax you are paying to Spain, and after that, request changes to your Finnish tax card if necessary. Submit an application for a revised 2023 tax card, with an estimate the amount of tax you pay to Spain.
In MyTax estimate the amount of tax payable to Spain in the section
- Pay, pensions and benefits, or
- Non-resident’s pensions and payments.
If you submit the application on paper Form 6207a, in Finnish), fill in the amount of tax underCrediting of tax paid abroad (reverse credit).
Check the 2022 pre-completed tax return
You receive a pre-completed tax return in spring 2023. Please check that the information is correct.
If necessary, go to Taxes paid abroad in MyTax to enter the correct amount of taxes you have paid to Spain; or if you use Form 50A on paper, fill it in under Crediting of tax paid abroad (reverse credit).
It is customary for Finnish payors of pensions to withhold tax from the January payment in accordance with the percentage rate stated on the previous year’s card. For many bene-ficiaries of pensions, this means that when you received your pension for January 2022, the withholding was too low. Only an amount reflecting the Finnish healthcare contribution was withheld. If this concerns you, the sum total of withholding is not enough; as a result, you may have to pay back taxes for the year 2022.
If you move to Spain permanently
If you move to Spain permanently, you are expected to let the Tax Administration know.
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 living quarters in Finland and you stay in Finland a lot, it will be more complicated to determine whether you have moved permanently. In such cases, determining the country of tax residence requires careful consideration of your overall situation.
The taxes you have paid to Spain can be taken into account in your Finnish taxation if
- you have given information to the Tax Administration in sufficient detail concerning your departure from Finland;
- you have submitted a notification of move from Finland to live permanently in Spain to the DVV, the Digital and Population Data Services Agency;
- you have a permanent place of residence in Spain; and
- the Spanish tax authorities consider you to be a resident of Spain in accordance with the tax treaty. Note that if this is the case, your other income from Finland may also be taxed in Spain.
Ask the Finnish Tax Administration for a tax card
If you want that the tax you have paid to Spain is taken into account on your tax card, request a revised tax card in MyTax or on Form 6207a (in Finnish).
Attach
- a document 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, for example a copy of the deed of sale or rental contract
- proof that you no longer have a home in Finland. Acceptable proof is, for example, a copy of the deed of sale, a statement showing that you have given notice on your rental contract, or an account stating that you have rented out the apartment you own.
Health care contribution payable to Finland
Even when you live in Spain on a permanent basis, Finland usually reimburses your medical costs to Spain. Because of this, you must pay the insured person’s health care contribution, which is less than 2% of the pension, to Finland. The reimbursement of medical costs is governed by the EU regulations on social security. The health care contribution is included in the withholding rate.
A new tax treaty was concluded between Finland and Spain, and it has been applied as of 1 January 2019. The tax treaty provides that if you receive pension from Finland, you must pay tax to Finland.
However, pension based on motor liability insurance or other such risk insurance will be taxed in Spain only.
Pension income from the private sector is taxed only by Spain for the first 3 years
A 3-year transition period was agreed to apply to pension income received from the private sector in 2019–2021. During the period, you do not pay tax on your pension to Finland. However, this requires that the pension you receive from Finland is treated as your taxable income in Spain.
If the pension you receive from the private sector is not subject to tax in Spain, it will be taxed by Finland starting 1 January 2019, i.e. the transition period is not applied.
In other words, for the 3-year transition period to be applied, your pension from Finland has to be from the private sector and be treated as taxable in Spain. The transition rule may apply to pension you receive from Finland even if you do not actually pay tax on the pension to Spain because your total income stays below a certain limit or you have a lot of deductions. The main thing is that the pension is subject to tax in Spain.
You must pay the health care contribution on the pension to Finland, however, if Finland reimburses your medical costs to Spain.
Tax paid to Spain is deducted from tax imposed in Finland
Usually tax treaties provide that if double taxation occurs, it will be eliminated by the individual’s country of residence. Exceptionally, however, the tax treaty with Spain states that double taxation on pension income will be eliminated in the country of source. This is called reverse credit.
In 2019–2021, however, the reverse credit applies only to pensions to which the 3-year transition period does not apply, i.e. the following pensions:
- pension based on a voluntary pension insurance contract taken out by the taxpayer
- pension based on a YEL/MYEL insurance contract
- national pension.
If you live in Spain but receive Finnish pension on which you must pay tax to Finland, the tax you have paid on the pension to Spain will be credited to you in your taxation in Finland. Calculate the Spanish tax on the pension you receive from Finland in the same proportion as is the proportion of the pension in all your income taxable in Spain.
Example: You receive €20,000 in pension from Finland based on a voluntary pension insurance contract that you have taken out yourself. Additionally, you receive €30,000 a year in earnings-related pension, to which the transition rule applies. You have no other income subject to tax in Spain. You pay a total of €15,000 in tax on your pensions to Spain.
The Spanish tax on the pension based on your voluntary pension insurance is calculated as follows:
The pension based on voluntary insurance received from Finland (€20,000) is divided by the total amount of income taxable in Spain (€50,000). The result is then multiplied by the total amount of tax paid to Spain (€15,000).
€6,000 (20,000 / 50,000 x 15,000).
The Spanish tax on the pension based on voluntary insurance received from Finland is thus €6,000.
Note: However, double taxation of pension income from the public sector is normally eliminated in the country of residence, i.e. Spain.
Health care contribution payable to Finland
Even when you live in Spain on a permanent basis, Finland usually reimburses your medical costs to Spain. Because of this, you must pay the insured person’s health care contribution, which is less than 2% of the pension, to Finland. The reimbursement of medical costs is governed by the EU regulations on social security.
Checklist for persons moving abroad
File a notification of move to the Finnish Digital Agency
- If you file a notification of permanent move, information about your move is forwarded to the Tax Administration automatically.
- If you file a notification of temporary move to the Digital and Population Data Services Agency, you should inform the Tax Administration separately. Print a form for reporting a temporary change of address (3817). If you do not want to use the form, you can send us a letter with the following details: your name, personal ID, new address and the date of move.
If you live abroad
- If your address abroad changes during your stay, you must inform both the Digital and Population Data Services Agency and the Tax Administration.
- If you are a Finnish citizen, you are expected to inform the Digital and Population Data Services Agency of any changes to the following information: address, marriage, divorce and births of children. See DVV’s website for more information about living abroad
Check with the Social Insurance Institution (Kela) whether you continue to be covered by the Finnish social security or whether Finland will reimburse your medical costs to your new country of residence.