Taxation of pension income in cross-border circumstances

This is an unofficial translation.

The official instruction is published in Finnish (Eläketulojen verotus kansainvälisissä tilanteissa, record number VH/5246/00.01.00/2026) and Swedish (Beskattning av pensioninkomster i internationella situationer, record number VH/5246/00.01.00/2026). The instruction discusses the income taxes of persons resident in Finland who receive pensions from abroad, and conversely, the income taxes of those who receive pensions from Finnish payors while residing in other countries.

This version has an update regarding the definition of Finnish-source income (section 4.2.4 below) in conjunction with a family pension, and another update regarding the elimination of double taxation when a U.S. citizen is a Finnish tax resident and the U.S.A. levies tax because of their citizenship although the provisions of the tax treaty do not give the taxing rights to the U.S.A. (section 5.5). Certain other updates were made for technical reasons.

1 Introduction

Resident individuals in Finland can be beneficiaries of retirement income, i.e. pensions, sourced to other countries. Likewise, people who are tax residents of foreign countries can receive pensions from sources in Finland. The rules on tax treatment are found in Finland’s internal legislation and in the tax treaty concluded between Finland and the country of source, or between Finland and the beneficiary’s country of tax residence. In general, Finland will have the right to levy tax on a pension paid from foreign countries to beneficiaries in Finland, and also on a pension paid out from Finland to other countries. However, Finnish internal law and the provisions of the relevant tax treaty may restrict Finland’s right to levy tax.

Tax treaty articles refer to the State where the item of income had arisen as the “source state”. Reason for designating one State as the “source” include: employment was exercised there, the payor’s domicile is located there, and other reasons. This memorandum uses the word “source” to refer to the country from where the pension is paid to the beneficiary. The “country of residence”, in turn, is the country where the individual beneficiary is resident within the meaning of the tax treaty.

The contents of this memorandum describe the impact of tax-treaty provisions on how taxes are assessed in Finland. We cover both the taxes imposed on a Finnish resident individual who receives a pension from a foreign source as well as the taxes imposed on an individual resident of a foreign country who receives a pension from Finland. This memorandum also contains a concise guide on healthcare contributions.

2 Resident and nonresident tax liability

Under § 9, subsection 1.1 of the act on income tax (Tuloverolaki 1535/1992), natural persons are tax residents of Finland if they live in this country. Under § 11, subsection 1 of the act, an individual is considered to live in Finland if he or she has their “permanent home and abode” in Finland, or if he or she stays in Finland continuously for more than 6 months. Residents must pay Finnish tax on their income, both on income sourced to Finland and on income sourced to other countries.

People who have not lived in Finland during the tax year are treated as nonresident taxpayers, having a limited liability for tax (§ 9, subsection 1, paragraph 2 of the act on income tax). Foreign citizens living outside Finland are considered tax nonresidents in Finland. Foreign citizens living outside Finland will remain nonresidents if they arrive in Finland but remain present in this country only for 6 months at most. Finnish citizens who have left Finland and been present in a foreign country for at least 3 years, or who have provided proof before the expiration of the 3-year limit that they did not have any substantial ties with Finland during the tax year are also considered nonresidents (§ 11, subsection 1 of the act on income tax). The legal provisions contain no exact definition of “substantial ties”. Instead, case-law has been used as a guideline for how substantial ties are determined. Nonresident individuals are only liable to pay tax in Finland on Finnish-source income.

Even if an individual is a tax resident of Finland under the Finnish act on income tax, he or she can additionally, because of living in another country, be treated as an individual taxpayer with full liability to tax on his or her worldwide income in that other country. This is known as double residency. The provisions of tax treaties require that one or the other Contracting State give up its rights to tax the double resident’s worldwide income. In general, the rules for resolving the double residency problem are found in the tax treaty’s Article 4, paragraph 2. The overall structure of the treaties is based on the principle that an individual taxpayer can only be a tax resident of one of the Contracting States.

For more information, see Tax residency, nonresidency, and residency in accordance with a tax treaty – natural persons.

3 The pension income concept

The system in Finland is primarily based on an earnings-related pension, which is related to the beneficiary’s past employment. In addition, the minimum-level categories of retirement income are called “national old-age pension” and “guarantee pension”. The above constitutes the mandatory coverage. Various arrangements made on a non-mandatory basis can complement it. Finland’s tax legislation does not list every single item of income that should be treated as a pension when the beneficiary’s taxes are assessed. Accordingly, some questions open to interpretation may surface if an individual beneficiary receives various forms of indemnity on a long-term basis. The tax authorities rely on established tax-assessment practice, which in turn is largely based on the existing tax rules on control different types of payments in the hands of beneficiaries. For example, under established practice of tax assessment, although the circumstances involve no formal decision on paid-out pension, an indemnity paid to beneficiaries due to their loss of earnings – generally based on motor traffic insurance and medical patient’s insurance contracts – is taxed as pension income. Its taxation as a form of pension begins one year after the date when the insured accident occurred.

Tax treaties contain no definition of what kind of income should be treated as a pension. Instead, every Contracting State is expected to provide an adequate definition based on its national legislation. For this reason, sometimes the Contracting States have contradictory qualifications: a certain type of income is defined as a pension in the source country while it is defined as a social benefit in the residence country. Qualification, for purposes of the treaty, has an impact on how the Article and provisions of the relevant treaty should be chosen. Moreover, under Finnish tax rules, the tax-deductions available to an individual beneficiary will vary by different types of income. For example, the deduction called “pension-income deduction” (eläketulovähennys; pensionsinkomstavdrag) is not available if Finland treats the income as a social benefit while the source country treats is as a pension.

The practice has been to treat all receipts of money as a pension when the type of income matches the definition of a pension in Finland’s national legislation. If a Finnish resident individual receives some income sourced to a foreign country, and it would under Finland’s national legislation be a pension, the Finnish Tax Administration will levy tax on it in accordance with the tax rules on pensions, and the source country’s income qualification does not matter. In the same way, payments to overseas beneficiaries from a Finnish payor that are treated as pensions here are taxed in Finland in accordance with the tax rules on pensions, if the relevant tax treaty’s articles on pensions give Finland the taxing rights.

For more information, see “Taxation of pension income” — Eläketulon verotus (in Finnish and Swedish).

4 Tax treaties

4.1 Introduction to treaty articles on pensions

Tax treaties affect the treatment of income when pensions are paid from foreign countries to Finland and vice versa. The provisions on taxing rights on pensions are found in Articles 17 and 18 in the tax treaties that are recent, and in older tax treaties, the provisions are in Articles 18 and 19. If the provisions of the articles on pension income are not applicable to a particular pension, the article on other income (usually Article 21) will be applied instead.

In situations where a tax treaty applies on the pension’s tax treatment, the important factors include whether or not the pension is based on past services rendered to the public sector or on past employment with a private-sector employer. Moreover, the beneficiary’s citizenship sometimes has an impact on how taxing rights are allocated. However, treaty provisions do not affect the way insurance contributions must be paid. Finland has signed tax treaties with more than 70 countries. The Tax Administration’s website www.tax.fi has a list of Finland's tax treaties in force. The website of Finland’s Ministry of Finance provides information on the current situation regarding treaties that are being amended and treaties currently under negotiation.

In the tax treaties between Finland and other countries, the article on pensions usually covers three different types of pension:

Pensions based on social security legislation
Other pensions based on past employment in the private sector
Annuities

The treaty provisions to control the taxes on pension earned from the public sector are almost always in treaty articles 18 or 19. Usually, the country of source has the right to tax the pension if the beneficiary had earned it during past service in a public-sector organisation. However, if the beneficiary is also a citizen of his or her country of tax residence, only the country of residence is allowed to tax these pensions. Another set of rules included in tax treaties provides that the rules on pensions from service in the public sector do not apply to a pension earned during employment with public entities that conduct a business operation.

It may be unclear whether the treaty provisions on government service or the treaty provisions on pensions should be applied. In the majority of Finland’s tax treaties with other countries, the government-service article has priority over the article on pensions. One of the consequences of this order of priority is that the article on government service is applied to the tax treatment of a pension within the meaning of the act on pensions of the public sector (Julkisten alojen eläkelaki (81/2016)) although the payment of this pension is based on social-security laws. An exception to the above is the pension earned during employment with public entities that conduct a business operation, because the treaty article on pensions is applicable because of a specific rule to that effect.

Sometimes, workers carry a pension insurance governed by the legislation designed for private-sector employers (such as the Employees Pensions Act (TyEL)) and the workers receive pensions from a pension institution of the private sector although the past employment had been with a public-sector entity. The treaty article on government service mostly discusses pensions that are paid out by a public entity or by a pension fund that the public entity had established. If the beneficiary’s past employment had involved a pension insurance contract with a pension institution of the private sector, the usual practice is to apply the treaty article on pensions instead of the treaty article on government service. However, the exact wordings of Finland’s tax treaties vary from treaty to treaty. We recommend that the text of the relevant tax treaty be studied if questions arise regarding the way these provisions should be applied on a particular situation.

A person may also have insurance coverage under the act on pensions of the public sector, even if their pension is no longer regarded as a pension earned in a public entity. This may be the case with regard to people employed by universities, for example. A pension for work done in the employ of a Finnish university after 1 January 2010 is not a pension earned in a public entity, not even if the work would from 1 January 2010 onwards still have been covered by an insurance policy under the act on pensions of the public sector.

In some tax treaties between Finland and other countries, the source country has the right to collect tax on a pension only if the pension is based on work done in the employ of legal person governed by public law. If a pension earned in the employ of a Finnish university is paid to a person residing in such a tax treaty country, the pension must be divided in two parts, determined by whether it had accrued in public-sector employment (before 1 January 2010) or during the years following the change. More specific treaty provisions on how the countries’ rights to levy tax are distributed must always be examined closely.

For purposes of tax treaties, receipts of money from a ‘PS’ long-term savings contract are not income within the meaning of the treaty. As a result, when an individual retiree receives an amount from a PS account, it is instead seen as a withdrawal of the retiree’s own deposited funds. Under special tax rules effective in Finland, these withdrawals are subject to income tax. For this reason, tax treaties are not applied on the retirement income from a PS account. This income is taxed in Finland without regard to tax-treaty provisions or to whether the recipient is a resident or non-resident taxpayer. For more information, see “Taxes on retirement income based on voluntary pension insurance and PS savings” — Pitkäaikaissäästämissopimuksen ja yksityishenkilön ottaman vapaaehtoisen yksilöllisen eläkevakuutuksen verotus (in Finnish and Swedish).

4.2.1 Statutory old-age pensions, pensions to people unable to work and pensions to the unemployed

This category of pensions is among those based on social-security laws, and the treaty article on pensions is applied. The tax treaties in force contain several different wordings when pensions based on legislation on social security are referred to, but the practice has been to interpret the wordings as having just one meaning. When a Contracting State pays out a pension based on social security, the source country is normally the country that taxes the income

Examples of Finnish pensions in this category include the pension based on the Employees Pensions Act (TyEL, 395/2006), the Self-Employed Persons’ Pensions Act (YEL, 1272/2006), the Farmers' Pensions Act (MYEL, 1280/2006), the seafarers’ pensions act (MEL, 1290/2006) and on the act governing accident insurance and pensions provided to athletes (276/2009). Other pensions based on social security laws are the pensions governed by the National Pensions Act (568/2007) and by the Act on Guarantee Pensions (703/2010).

4.2.2 The pension in accordance with the Act on occupational diseases and accidents

The pension based on the act on occupational diseases and accidents (Työtapaturma- ja ammattitautilaki (459/2015), the previous Finnish statute up to 31 December 2015 was called “tapaturmavakuutuslaki” (608/1048)), is a pension based on social security laws. As a result, the treaty article on pensions applies.

4.2.3 Employer-provided additional pension coverage

Some retired individuals may have an additional pension contract made during the period when the old, now repealed Act on employment pension (Työntekijäin eläkelaki (395/1961)) was in effect. This is an employer-paid contract, which under the provisions of § 11 of the repealed Act had to be entered in a certain register. If you receive a pension by virtue of a distribution from this type of contract, it is a pension based on social security laws (under the ruling KHO 1994-B-555). As a result, the treaty article on pensions applies.

If the pension was not registered as an additional benefit referred to in § 11 of the repealed Act, the tax treatment is the same as that of annuities, not pensions based on social security. If the tax treaty to be applied contains no provisions on annuities and if the additional benefit remains unregistered, it is a pension based on your past employment. However, the additional benefit may become taxable as a pension based on social security when you reach retirement age. At that point in time, the additional benefit ceases, and the individual’s statutory pension period begins. In general, an additional benefit that was not registered will change character into a pension based on social-security legislation if the additional benefit was accorded to the person as a benefit. If instead, the additional benefit is based on paid-in premiums, and it continues to be paid at the same time when statutory pensions are paid, the additional benefit’s characterisation does not change into pension based on social security.

4.2.4 Survivors' pension

Under Finnish law, the pension type known as survivors' pension (perhe-eläke; familjepension) can be paid to a deceased person’s surviving spouse and children. The distribution may be based on the deceased person’s (spouse’s or parent’s) earnings-related pension, pensions earned during self-employment, or based on national laws governing old-age pension.

When a tax treaty is applied, the Article that applies on survivors' pensions is the same that would apply to the deceased spouse’s or parent’s receipts of the underlying pension. If the pension provider pays the survivors’ pension to a nonresident, it is income sourced to Finland in the same way as the underlying pension would have been sourced to Finland if the deceased person were its recipient.

If the tax treaty contains a provision on pensions based on social security legislation, a survivors' pension based on an earnings-related pension or based on a self-employed person’s pension, or a survivor’s pension in accordance with the national pensions scheme is regarded as being based on social security in the same way as the earnings-related pension, self-employed person’s pension and national pension paid to the deceased person. If the tax treaty contains no provisions that would control the treatment of pensions based on social security, treaty provisions on pensions earned during past employment in the private sector can become applicable to survivors' pensions. However, if the underlying pension for the survivors' pensions is the national old-age pension, it cannot be regarded as being based on past employment. If the tax treaty contains no provisions on pensions based on social security but only a provision on pensions based on employment in the private sector, the treaty article on other income will be applied to survivors' pensions under the National Pensions Act.

Some treaties (including the Nordic Tax Treaty) do not differentiate between pensions based on social security and pensions earned during past employment in the private sector. In this case, the treaty article on pensions is applied on the survivors’ pension regardless of the category of the underlying pension, which may be earnings-related, based on self-employment, or based on national laws governing old-age pension.

If the deceased person’s pension was based on work done in the public sector, the tax treatment of a survivors' pension based on such a pension is determined in accordance with the treaty article on public sector employment.

Some treaties provide that the Contracting State’s taxing rights are dependent on the beneficiary’s citizenship. Where survivors' pensions are distributed, the citizenship of the actual beneficiary is important in this regard, not the deceased person’s citizenship.

Other periodic payments called a ‘pension’ or an ‘annuity’ (Finnish: eläke, elinkorko) may also be taxed as income based on social security legislation. They include the distributions based on the act on war veterans’ injuries (Sotilasvammalaki (404/1948)) and on the act on occupational diseases (Ammattitautilaki (1343/1988, now repealed)), and supplementary journalist pensions (Government decision 1977/37), artist pensions (act on supplementary artist pension 194/2016) and athlete pensions (act on supplementary athlete pensions 1419/2014). In general, all other distributions based on social security in addition to pensions fall under the scope of application of the treaty article on pensions (article 18 in almost all treaties). Examples of these distributions – which are not pensions – include unemployment relief, labour market subsidy and the government-paid sickness allowance.

However, even if an income consisting of periodic receipts of a distribution were based on social security, it does not fall under the treaty-defined category of distributions based on social-security legislation if it is part of the individual beneficiary’s remuneration for work. An example of such remuneration is the Finnish public support paid to family caregivers (omaishoitajan tuki; stöd för närståendevård). The reason is that the useful rewards from the rendered social service go to a different person, not to the beneficiary of the distribution.

4.2.6 Pension based on motor vehicle liability insurance

A pension based on motor liability insurance is not a pension based on social security legislation. These pensions cannot be seen as being linked to past employment. As a result, the main approach is to apply the treaty article on other income (article 21 in most tax treaties).

4.3 Other pensions based on past employment in the private sector

If the tax treaty contains no provisions that would control the treatment of pensions based on social security, the residence country taxes the distributions based on employment in the private sector. This means that article 18 cannot be applicable on national old-age pensions, pensions based on self-employment and agriculture (under the Finnish legal acts called YEL and MYEL, respectively). The treaty article on other income is applied instead, because these pensions are not based on past employment, i.e. working for someone else. The above rule also applies to situations where the pension’s period of accrual has been a period when no wages were paid to the individual. This kind of periods may be related to academic studies that were later finished as the individual earned a graduate degree.

Some of the treaties that Finland has signed with other countries, including the Nordic Tax Treaty and the Finland–UK treaty, contain no definition of pension income as having a link to the individual’s past employment. The provisions on pensions (in article 18 of the Nordic treaty and article 19 of the Finland–UK treaty) are applicable to all amounts that beneficiaries can receive, which under national legislation are defined as pensions – thus also including the motor insurance-related pension. These tax treaties give the country of source the taxing rights with respect to pensions.

4.4 Annuities

Many of the treaties that Finland has signed with other countries have specific provisions on annuities and a definition of annuity in the article on pensions. The definition is that “annuities” means stated sums paid periodically at stated times, during life or a specified or ascertainable number of years, under an obligation to make the payments in return for adequate and full consideration (in a sense, annuities are “pensions that someone has bought”). In some circumstances, periodic payments to the beneficiary are made bearing the name of annuities, although this does not match the treaty definition. Likewise, distributions based on social-security legislation may also be called annuities. Finnish legislation from earlier years and Finland’s older treaty texts may use the word “annuity”–elinkorko although the meaning is approximately the same as “pensions”.

How taxing rights on annuities are allocated to Contracting States varies from treaty to treaty. The treaties can also contain additional conditions and a maximum limit that restrict the taxing rights.

4.5 Individual retirement insurance contracts and other pension arrangements on a non-mandatory basis

Most distributions from these arrangements fall under the category of income defined as annuity by tax treaties. An arrangement of non-mandatory character i.e. “voluntary” pension insurance can be made by the individual himself or by the employer company. If the individual had been the contracting party that signed the voluntary pension insurance contract, and the relevant treaty’s article on pensions only has provisions on past employment and no provisions to control annuities are included, the treaty article to be applied will be the other income article.

If the treaty contains provisions on annuities, these provisions will apply on distributions from a voluntary employer-provided individual pension insurance contract or from a voluntary employer-provided collective pension insurance contract. The treaty provisions, if any, on annuities also apply on other retirement-income arrangements, including distributions from capital redemption policies and distributions paid out by private pension funds. Some retired individuals have an additional pension contract that was signed under the period when the old, now repealed Act on employment pension (Työntekijäin eläkelaki (395/1961)) was in effect, and the contract is registered as an additional benefit referred to in § 11 of the repealed Act. This is equated with a pension based on social security (see section 4.2.3 above).

Voluntary pension insurance can sometimes be surrendered before the age of retirement. Read more about surrender in section 6.3.8. For more information on pension contracts and on distributions from individual retirement accounts, see the Tax Administration’s instruction “Taxation of income from long-term savings agreements and individual retirement accounts” — Pitkäaikaissäästämissopimuksen ja vapaaehtoisen yksilöllisen eläkevakuutuksen verotus (in Finnish and Swedish).

4.6 Relief for international double taxes on a pension

4.6.1 The credit method and the exemption method

It is a common occurrence that both the source country and the beneficiary’s country of residence levies tax on pensions. The standard process is that the individual beneficiary’s country of residence should relieve any double taxation. If Finland is the country of residence for treaty purposes, Finland is the country that relieves double taxation in accordance with tax-treaty provisions, either through the credit or the exemption method. (For more information, see Relief for international double taxation in natural persons’ tax assessment). More rarely occurring situations involve treaty provisions that lay down that the pension is fully exempted from taxes in Finland, which leaves the tax treatment of the beneficiary’s other income unaffected by the receipts of that pension.

The country of residence takes action to relieve double taxation only if tax had been withheld in the source country in accordance with treaty provisions. If the pension would only be taxed in the residence country according to the treaty, but a withholding was carried out in the source country, the country of residence takes no action to relieve double taxation. This means that if the beneficiary paid too much tax to the source country because of the excessive withholding, he or she must request a refund from that country’s tax authority. To do so, the beneficiary must contact the tax authority and ask for instructions. For a further discussion of the effects on Finnish taxes of a tax assessment carried out in a foreign country that had not been in line with the relevant treaty, see the Tax Administration’s instruction “Taxation abroad contrary to tax treaty”.

Sometimes the source country authorities interpret the category of the income in a mismatched way from a Finnish perspective. For example, there may be an item of income that under the treaty’s article on pensions must be taxed in Finland only – as Finland regards is as a pension – but the source country had treated the income as relating to another treaty article. Because of that interpretation, the source country believes to have the taxing rights. Under the circumstances, Finland would recognize the source country’s interpretation of how the item of income should be classified. Accordingly, Finland would take action to relieve the resulting double taxation although there is a difference between Finland’s and the other Contracting State’s interpretation. The method of relief depends on the treaty article that the source country had chosen to apply (for more information on the rules affecting tax treatment in Finland, see also chapter 3 above).

If the source country of the pension has no tax treaty with Finland, the entire receipts of the income in the Finnish beneficiary’s hands are subject to tax. The Finnish Tax Administration will remove any double taxation under the credit method. In accordance with the provisions of § 3 of the act on the elimination of international double taxation (1552/95), only the tax paid to a foreign sovereign state can be credited. As a result, no tax can be credited if it had been paid to the local municipality or to the federal state.

4.6.2 Tax-treaty articles on reverse crediting

If a Finnish payor is paying a pension based on social security to an individual beneficiary who is a tax resident of Italy, Switzerland or Thailand, then, in spite of being the source country, Finland is the country that takes the necessary measures to relieve double taxation. This is called reverse credit.

Reverse crediting is also applied on a pension within the meaning of Article 17, paragraph 2 of the tax treaty between Finland and Spain. This means that reverse crediting is applied to almost all pensions paid from Finland to tax residents of Spain, the only exception being a pension based on past service in the public sector. However, reverse credits also apply to the pensions paid by public entities that operate business. Reverse credits are not applicable on pensions based on motor vehicle liability insurance because this category of pensions is only taxable in the beneficiary’s country of residence.

The effective outcome of reverse credit, in the case of income in the form of pensions, benefits or annuities from a Finnish source, is that after the tax paid to the country of residence has been subtracted on this income, Finnish tax authorities assess the taxes in Finland on it. However, the credit cannot be greater than the amount of taxes to be levied in Finland on the same income. The rules on foreign tax credit laid down by the act on elimination of international double taxation (Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta, 1552/1995) do not apply, because the said act only controls the double taxation caused by income sourced to a foreign country.

If the beneficiary not only receives pension from Finland but also other income, and that income is subject to tax in the beneficiary’s country of tax residence, the reverse-creditable amount is calculated on a proportional basis, taking account of the beneficiary’s net taxable income totals from the two Contracting States. For this reason, it is necessary for the beneficiary to inform the Tax Administration of how much tax was paid to the country of residence on the beneficiary’s Finnish-source pension, taking account of the natural deductions allowed in that country (tax-deductible expenses for the production of income and for maintaining the income).

4.6.3 The ceiling rule in tax assessment

Subsection 3 of § 136 of the act on income taxation is a ceiling rule that sets out the maximum level of taxes. The rule is applied when a tax resident of Finland has received income taxable as earned income sourced to a foreign country and when the method for relieving double taxation is the exemption method. The purpose of the ceiling rule is to ensure that individuals who received foreign-source income do not have to pay more tax on earned income than persons who received an equal amount of income from Finnish sources only (§ 136.4 of the act on income tax).

The ceiling rule calls for a calculation to determine whether the individual taxpayer’s total burden of taxation (foreign-paid income taxes + Finnish income taxes) is heavier than the tax burden on someone who would receive the same amount of income from Finnish sources only. If the result of such a calculation shows that the burden would be heavier, Finland relinquishes a proportional part of its income taxes. However, the rule has no impact on how health insurance contributions, the Public Broadcasting Tax and Ahvenanmaa media fee are assessed.

5 Taxes on a foreign-source pension received by a Finnish resident

5.1 General remarks about taxes on pensions sourced to other countries

Pursuant to § 9, subsection 1.1 of the act on income tax, residents are liable to tax on both income sourced to Finland and on income sourced to other countries. Accordingly, retirement income i.e. pensions, if sourced to foreign countries is part of a Finnish resident’s income subject to tax – even if the pensions were already taxed in the country of source.

The articles of the double tax treaty signed between Finland and the country of source have an effect on the tax treatment. The provisions vary from tax treaty to tax treaty. For this reason, we recommend that the particular treaty that applies to the circumstances be studied carefully.

The sections and passages below discuss the taxes in typical cross-border situations from the beneficiaries’ perspective. We focus on the impact of the treaties that are in effect between Finland and countries of source. There is considerable variation in the way pensions are financed and paid out to beneficiaries in different countries of the world. From the perspective of the tax system in our country, it is often difficult to determine how various items of income in the hands of a Finnish individual resident taxpayer should be qualified. Likewise, it is difficult to identify the treaty provisions that apply. In these circumstances, the rules affecting income taxes will vary case by case. A number of special situations are also addressed below, and the text discusses the treatment of the income received in the form of distributions from various pension insurance contracts, the treatment of individual retirement accounts, and the treatment of refunded insurance premiums.

Not only the tax treaty but also other international conventions affect taxes on pension income. One of the topics discussed below is the taxation of the pensions received by former employees of the European Union and of the United Nations.

5.2 Sweden, Denmark, Norway and Iceland

A pension received from a source in one of the Nordic countries is part of a Finnish resident’s income subject to tax. Article 18 of the Nordic Tax Treaty (SopS 26/1997) contains rules on how the pension must be taxed. The Nordic Tax Treaty has no specific article that would set out rules on pensions based on past service for a public entity. For this reason, the provisions of article 18 are applied on all categories of pensions. Article 18 lays down that the country of source always has the taxing rights with respect to retirement income. As a result, the country of residence, i.e. Finland, is the country that must relieve any double taxation. In general, double taxation is eliminated by means of the credit method.

There is an exception in Article 26, paragraph 2 from the general rule described above: this paragraph contains rules on the secondary taxing right that a Nordic Contracting State may have. If based on treaty provisions, the source country receives the right to levy tax but the source country does not use that right because of its national legislation, the only Contracting State that can levy tax on the income is the beneficiary’s country of residence. As a result, there is no need to relieve double taxation.

Changes were made to the Nordic Tax Treaty on 4 April 2008. After the change, the exemption method is applied on Nordic-sourced pension income if the beneficiary had been a Finnish tax resident on or prior to 4 April 2008 and had received, already at that time, pensions from another Nordic country. The exemption method continues to be applied for as long as the beneficiary resides in Finland on a continuous basis. In addition, the exemption method is also applied on a new pension income, the start date of which is later than 4 April 2008, if the beneficiary had been a Finnish tax resident and had received, prior to 4 April 2008, a pension from another Nordic country and double taxation was relieved for that pension through the exemption method.

The indemnity called “Sjuk- och aktivitetsersättning” is paid out from a Swedish source to individuals who have a reduced ability to work. This form of income is regarded as pension income in Sweden. In the Finnish tax assessment it is pension income as well.

5.2.1 Tax paid to Sweden, subject to crediting in Finland

The tax assessment of pensions in Sweden is affected by whether the individual beneficiary is a Swedish tax resident or a tax nonresident in Sweden. If you are a nonresident in Sweden and you receive pension, you pay the Swedish SINK tax. Part of your income can be exempt from taxes in Sweden, if you are a beneficiary of “allmän pension” (general pension) based on Sweden’s legislation on social security. If the pension from a Swedish source does not reach a certain threshold of taxation, Sweden will levy no tax.

This is an exemption based on Sweden’s national legislation but from the Finnish perspective, whether or not the sum reaches the threshold has no impact on the income being subject to tax in Finland. The entire amount of your pension income from Swedish sources is subject to tax in Finland even if some or all of it is exempt from tax in Sweden.

5.3 Estonia

Article 18, or Article 19, paragraph 2 of the Finland–Estonia tax treaty (SopS 96/1993) contains rules on how a pension sourced to Estonia is taxed. Pensions based on social-security legislation from Estonia are part of a Finnish resident’s income subject to tax. Any resulting double taxation is relieved through the exemption method. The same procedure is applied if the pensions are based on past service with a public entity when the beneficiary is a Finnish tax resident while not a citizen of Finland (under Article 19, paragraph 2, line “a”).

At the same time, if a Finnish tax resident who also is a Finnish citizen receives a pension from Estonia based on past service with a public entity, this pension will be taxed in Finland only (under Article 19, paragraph 2, line “b”). In the same way, pensions not based on Estonian legislation on social security are only taxed in Finland if the beneficiary is without any citizenship or if the beneficiary is a citizen of Finland who does not simultaneously have Estonian citizenship.

Any pension not based on the Estonian legislation on social security, paid to a Finnish resident who is an Estonian citizen, is taxed in Finland. Any resulting double taxation is relieved through the credit method.

If the pension is based on past employment with a public entity that conducts a business operation, the treaty provisions that apply are those of Article 18 of the Estonian–Finnish treaty – not Article 19, paragraph 2.

Normally, when the “Sotsiaalkindlustusamet” agency in Estonia is the provider of a pension, it is pension income as referred to in Article 18 of the Estonia–Finland tax treaty. This means that such a pension is not based on past service with a public entity. However, exceptions to the above rule are sometimes made. For this reason, the question of how the taxing rights are allocated between the Contracting States must be resolved case by case.

5.4 The Federal Republic of Germany

Under the Germany–Finland treaty (SopS 86/2017), Finland has the taxing rights on all types of pensions from sources in Germany in the hands of a Finnish tax resident. Inasmuch as the treaty provisions also give a taxing right to Germany, double taxation is eliminated in Finland, either through the credit or the exemption method. The choice depends on the type of the pension.

If a Finnish resident individual receives a pension from Germany based on social security or based on the public social security system, the pension is taxed in Finland. However, the pension may additionally be taxed in Germany. Any resulting double taxation is relieved in Finland through the credit method.

In the same way, if a Finnish resident receives distributions from Germany from a voluntary pension insurance contract or from comparable accounts and contracts, the income is taxed in Finland. However, it may also be taxed in Germany. Any resulting double taxation is relieved in Finland through the credit method.

However, a pension based on service with a public entity is only taxed in Germany. During the tax assessment of the beneficiary in Finland, the Tax Administration will add this income to the beneficiary’s other income when assessing the tax on other income. The German-sourced pension is, in that case, taxed in Finland as an item of income related to the exemption method. In contrast with the above, a pension based on past service with a public entity is only taxed in Finland if the beneficiary is a resident here and a Finnish citizen. In this case, Germany does not have the right to levy tax the income. If the pension is based on past employment with a public entity that operates a business, it is taxed in Finland and the method applied when Finland relieves double taxation will be the credit method.

If a pension institution of the private sector is the payor of a pension based on past service with a public entity, and if the Federal Republic of Germany applies treaty Article 17 on that pension, it may additionally be taxed in Germany. Any resulting double taxation is relieved in Finland through the credit method.

5.5 The United States of America

Articles 18 and 19 of the Finland–U.S. tax treaty (SopS 2/1991) contain rules on how a pension sourced to the United States is taxed. Under the treaty, receipts of pensions based on past employment in the private sector by an individual whose country of residence is Finland are taxed in Finland only (Article 18, paragraph 1, line (a)).

Receipts of pensions from the United States with respect to former service in a public sector organisation are only taxed in the United States, if the beneficiary is not a citizen of Finland (Article 19, paragraph 2, lines (a) and (b)). In the same way, if a resident of Finland receives pensions based on social security legislation from the United States, the income is taxed in the United States only (Article 18, paragraph 1, line (b)). However, the U.S.-source pension income is added to the beneficiary’s other income when taxes are assessed in Finland. This means that is taxed in Finland as an item of income relating to the exemption method.

If a pensioner residing in Finland is a U.S. citizen, the U.S. may tax the pension on the grounds of citizenship. If the United States assess the taxes based solely on citizenship and the tax treaty would not otherwise give the United States a taxing right, the United States will also have the obligation to eliminate double taxation. A tax paid to the United States, levied on grounds of citizenship alone and for which the tax treaty would not otherwise grant the United States the right to tax (Articles 18 and 23) cannot be credited by the Finnish tax authority.

5.5.1 Distributions from U.S. retirement accounts known as the 401(k) and IRA

Widely used in the United States are the 401(k) programs for savings towards retirement. Deposits, often called contributions, can be made both by the worker and the employer. Under U.S. legislation, workers are entitled to assign part of their gross wages to go to the 401(k) account (the pretax method of depositing money). Employees can alternatively assign money to the 401(k) program from their net income (the after-tax method), and this arrangement is known as the Roth 401(k) account.

When an individual beneficiary is a resident of Finland and he or she withdraws a sum from the 401(k) arrangement or from a comparable employer-provided pension savings arrangement, so that he or she has reached the retirement age and satisfied the other requirements of 401(k), the withdrawal is subject to Finnish taxation as pension income, insofar as the employer had deposited the relevant amount of money, or insofar as the worker had deposited it before tax (under the pretax method). This includes the deposit i.e. investment itself and any returns on it. The withdrawal may alternatively be based on worker-deposited after-tax assignments to the 401(k), (under the after-tax method). In this case, the beneficiary can withdraw the sum and it is exempt from Finnish taxes. However, if there is a return on investment and part of the withdrawal consists of that return, this part is an item of capital income, subject to Finnish tax.

If the beneficiary has a U.S. Individual Retirement Account, IRA, Finnish taxes are imposed the same way as with the 401(k) account, if the balance in the IRA is based on a transfer of money from the beneficiary’s 401(k) arrangement. If the balance in the individual beneficiary’s IRA is not based on a 401(k) arrangement, because the individual had deposited money directly into the IRA, the withdrawal is taxed in Finland and treated as pension income. The same applies to the part of the withdrawals from an IRA that is based on employer’s deposits into the worker’s IRA. The program variant in which the worker has an IRA and puts money in it from net income (after-tax method), withdrawals are taxed in Finland only insofar as they consist of returns on investment (and they become an item of capital income, subject to Finnish tax). The program variant in which the worker deposits money in their IRA from net income (after-tax method) is called “Roth IRA”.

If the beneficiary has either a 401(k) or an IRA, from which he or she withdraws money before retirement age is reached, in advance of the terms and conditions (before maturity), withdrawals are taxed in Finland under the tax rules on other earned income, not pension income. If the withdrawals are based on the worker’s past deposits from his or her net income (after-tax method), the withdrawals are taxed in Finland only insofar as they consist of returns on investment (as capital income, subject to Finnish tax).

When an individual beneficiary is a resident of Finland and he or she receives a pension from the United States based on 401(k) or IRA, the income is taxable only in Finland. Under the provisions of the treaty, the United States has no taxing rights on the income. However, the U.S. payor can withhold an amount of 30% as an internal, U.S. withholding tax. This has occurred even in cases where the beneficiary has shown the payor the W-8BEN form, which is an IRS form that should prove his or her foreign, non-U.S. status as a beneficiary. However, the amounts withheld in this manner are not regarded as a final tax. Beneficiaries resident in Finland can ask the IRS to refund the withholding because under the provisions of the treaty, the United States has no taxing rights with respect to the income. The beneficiary’s Finnish assessment for the year cannot include credit based on amounts paid to the United States on items of income that – under the tax treaty – have been outside of U.S. taxing rights.

If the U.S. withholding is still not refunded by the time when Finnish assessment is completed and when the ensuing back taxes fall due, the beneficiary may ask the Finnish Tax Administration to set up a payment arrangement. For more information on payment plans, see the Tax Administration’s Payment arrangement guides. Section 4.6 above discusses the consequences of a tax assessment contrary to the provisions of the tax treaty that another country’s authorities have carried out. For more information, see Elimination of double taxation (above) and the instruction Taxation abroad contrary to tax treaty.

5.6 Individual retirement accounts and other pension insurance on a non-mandatory basis

If you have signed an agreement with a foreign insurance company on an individual retirement account of some kind, the Finnish rules to be applied are those of the act on income tax, on the condition that the insurance policy satisfies the requirements listed in § 34a of the act (from 1 January 2027 onwards, the list of requirements will be included in § 34c). This means that the distributions you receive during your retirement are seen as earned income, insofar as you deducted the contributions against your earned income in your Finnish tax assessment during the years when you paid the contributions. The distributions are also seen as earned income if the contributions were based on an employer-provided pension insurance contract with the foreign insurance company. Insofar as the distributions you receive do not satisfy either of these two conditions, they are seen as capital income. As regards pension savings accrued from contributions paid on or after 1 January 2027, only the investment return is taxable.

If you had been on a savings program to prepare for your retirement on a voluntary basis and you are a Finnish resident, the income you withdraw from the program is earned income, taxable as pension income. To make withdrawals is treated as income subject to tax regardless of whether the accumulated savings were based on your deposits as the worker, or on deposits made by your employer. Insofar as you, the worker, had deposited your after-tax earnings or wages into the savings program (the after-tax method), only the part consisting of return on your investment is income subject to tax (capital-income tax) (ruling KHO 2018:55 of Finland’s Supreme Administrative Court). Often, the taxing right with respect to such income is also allocated to the source country of the income. In that case, Finland will provide relief for any resulting double taxation through the method set out by the tax treaty, i.e. either through the credit method or through the exemption method.

5.7 Receiving refunds of pension insurance contributions or premiums and lump-sum withdrawal of pension savings

It may be that you receive the previously contributed money back, which you had paid in to a foreign pension insurance or pension plan, as you stop working for your foreign employer in the country concerned. The refund of pension contributions or a withdrawal of pension savings is often linked to a situation where a person has worked in the foreign country only for a short period. In some cases you are only refunded the contributions you had paid, not the full balance of the pension savings. In other cases, you are refunded the entire savings, i.e. the pension insurance contributions paid and the return on your investment. There are several different ways to refund the contributions.

If you receive any refunds of paid-in foreign pension contributions and you are a Finnish resident, it is income subject to tax, classified as part of your earned income. It is treated as income subject to tax regardless of whether the refunds are based on contributions that you, the worker, had paid – or contributions made by your employer. The received refund is not wages, so the tax-exemption for work in a foreign country within the meaning of § 77 of the act on income tax is not applicable although during the time when the contributions were paid in, and the pension accrued, you had worked in a foreign country (ruling KHO 15 May 2001, record no 1133).

In general, a refund of contributions or a lump-sum withdrawal of pension savings is taxable earned income in full. However, if you had used your after-tax money to pay the contributions (the after-tax method), the received refund is income subject to tax (capital-income tax) in your hands only for the part consisting of returns on your investment.

In some circumstances, retired individuals are able to withdraw their entire pension (lump sum) that they have earned in a foreign country, in accordance with local legislation. The lump sum can be withdrawn when you reach the statutory retirement age, sometimes even before that. Because worker-paid contributions may have been deducted during the years when you made them because they were contributions within the meaning of § 96 of the act on income tax, the entire lump sum will be treated as income subject to tax.

If you withdraw the savings as a lump sum before the standard retirement age is reached under the rules of the pension system concerned, the withdrawal is subject to tax as “other” earned income. In the reverse case, if you first reach retirement age and then withdraw the money, it will be a pension and taxed accordingly. The Finnish rules on income spreading, under the provisions of § 128 of the act on income tax, are applicable to both of the above withdrawals if the other requirements relevant to income spreading are fulfilled.

For more information on the tax treatment of amounts withdrawn from voluntary pension accounts, see sections 5.5.1 and 5.6 above.

5.8 The United Nations (UN)

Wages and fees in the hands of the employees (civil servants) who work for the United Nations and its Special Organizations are exempt from taxes under the Convention on the Privileges and Immunities of the UN (SopS 24/1958). However, the exemption does not extend to the employee’s (civil servant’s) pension income although the payor is the United Nations or its Special Organizations. This means that pensions received from that source are part of a Finnish resident’s income subject to tax (under ruling KHO 1990-B-528 and ruling KHO 1978-B-II-556).

For more information on taxes on pensions received from the United Nations, see Taxation of income from international organisations, the EU and diplomatic missions.

5.9 The European Union (EU)

Under the Protocol on the privileges and immunities of the Communities, article 12 (which previously was article 13), exemption is accorded to employees (civil servants) from national taxes on salaries, wages and emoluments paid by the European Union. Moreover, under Regulation (Euratom, ECSC, EEC) No 549/69 of the Council, article 2, exemption is also given to persons receiving disability, retirement or survivors' pensions paid by the Communities. In reference to the above, the pensions paid by the EU to earlier employees (civil servants and functionaries) are not taxed in Finland if the beneficiaries pay taxes on them to the EU. In the same way, these pensions have no impact on the tax treatment of any other earned income that the beneficiaries may have (Jean Humblet vs. the Federal State of Belgium C-6/60).

In general, persons whose service career with the European Union remains shorter than one year are not entitled to pension from the EU. In this case, it may be that he or she is entitled to severance pay when the service contract terminates (under Article 12 of the Protocol on the privileges and immunities of the European Union). Receipts of severance pay are not a refund of paid-in pension contributions or a lump-sum withdrawal of the same. The beneficiary of the severance pay must pay tax on it to the EU. As a consequence, Finland will levy no tax on it.

Pensions are paid from EU funds to the members of the European Parliament. Such a pension too is subject to tax payable to the EU. Under the new Statute for Members of the European Parliament (2005/684/EC), Member States have the power to make the salaries and pensions paid to MEPs subject to national tax law provisions, provided that any double taxation is avoided. In the case of a Finnish resident individual who becomes a beneficiary of a pension based on past parliamentary membership, the income is subject to Finnish tax. Relief for double taxation is provided through the credit method, as referred to in § 9 of the act on the elimination of international double taxation.

If a set of requirements are fulfilled, an individual in the service of the European Union can reassign his or her pension rights to Finland. For more information, see the Tax Administration’s specific guide “Tax treatment of the transfer of pension rights between the Finnish and EC pension systems” – Euroopan unionin henkilöstön eläkeoikeuden siirto verotuksessa (in Finnish and in Swedish). For more information on pensions received from the EU and the European Parliament, see Taxation of income from international organisations, the EU and diplomatic missions.

5.10 Pensions from foreign payors to Finnish residents and the healthcare contribution of health insurance

5.10.1 How the healthcare contribution of health insurance is determined

Chapter 18, § 19a of the Health Insurance Act (1224/2004) contains detailed rules on foreign-source pension income, which can be the base for the contribution. Under Chapter 18, § 19, subsection 1, if an individual receives a pension from abroad, it must be included in the base for determining the contribution.

However, no pensions within the meaning of the EU’s Social security regulation or Basic regulation, paid to a beneficiary in Finland from another EU or EEA country, or from Switzerland or Great Britain, need to be included if

the person is not being paid a pension based on the Social security regulation or Basic regulation, from Finland, or
while working in the country paying the foreign pension, the person paid insurance contributions based on his wage income in order to fund medical care expenses during retirement.

There is a maximum amount laid down in Chapter 18, § 19a, subsection 4 that the healthcare contribution of health insurance based on pensions from the EU/ETA or Switzerland must not exceed: it cannot be greater than the total of pensions paid from Finland within the meaning of the Social security regulation or Basic regulation.

5.10.2 The healthcare contribution of health insurance in the case of a pension sourced to Sweden

Ruling no C-50/05 was handed down by the European Court of Justice in 2006. The ruling concerns a case where an individual beneficiary, a Finnish resident, received pensions from sources in Finland and in Sweden. According to the ruling, the conclusion of how the base should be determined for insurance contributions is that the residence country can include in the base of calculation, in addition to the pensions paid in the residence country, a pension paid by the institutions of another Member State, provided that the contributions will not exceed the amount of pensions received from the residence country.

The following was included in the text of the ruling: “However, Article 39 EC (which is 45 TFEU at present) precludes the amount of pensions received from institutions of another Member State from being taken into account if contributions had been paid in that other State out of income from work received in that State. It is for the persons concerned to prove that the earlier contributions were in fact paid”.

In 2007, the Tax Administration asked Skatteverket, the Swedish Tax Agency to state its opinion on whether relevant Swedish contributions had been paid by the Finnish pensioners who had lived and worked in Sweden. The answer from Skatteverket lays down that they paid them in 1963−1974 and again, 1993−1997. Nevertheless, the purpose of the Swedish authorities to levy this contribution was not that the amounts would go toward the insured individuals’ medical expenses, which would have to be covered in the future i.e. following retirement from work. This means that the beneficiaries need not pay double contributions for covering one set of healthcare benefits, because Finland includes also the pensions sourced to Sweden in the beneficiaries’ base for the healthcare contribution.

The statement on the subject: Ruotsin verohallinnon selvitys sairausvakuutusmaksusta (in Finnish and Swedish).

6 Taxes on a pension sourced to Finland

6.1 General remarks about Finnish taxes on pensions

Finland, being the source country, normally levies tax on a pension paid to a beneficiary in another country. However, Finland's right to levy tax may be restricted by a tax treaty, and this may take the form of either preventing Finnish taxation on the pension or setting a maximum level for the Finnish tax indicated as a percentage. If the beneficiary is a tax nonresident, our country’s national legislation will also have an impact on Finland’s taxing rights.

If the beneficiary is a Finnish citizen, he or she can still be a Finnish tax resident during the year when moving away from Finland to start living in the other country – and during the three following years. Residents must pay Finnish tax on their income, both on Finnish-source income and foreign-source income. However, Finland's right to tax may be restricted by a tax treaty if the beneficiary’s country of tax residence for treaty purposes is another country, not Finland. In this case, when the treaty provisions are applied, Finland is placed in the position of the source country.

Nonresident individuals are only liable to pay tax to Finland on Finnish-source income. Receipts of income in nonresidents’ hands may be taxed in Finland only if the income is sourced to Finland. A list of items of income that are seen as sourced to Finland is in § 10 of the act on income tax. It is a list intended as an example, and many other categories and types of income that are not on the list can be seen as being sourced to Finland as well. However, the income examples on the list are sourced to Finland only within the limits set out by the wording of § 10 (in reference to the text of the act on income tax in Finnish and Swedish). Retirement income received from a Finnish source is generally income sourced to Finland within the meaning of § 10. The tax treatment of Finnish-source retirement income in the hands of a nonresident is not only affected by national legal provisions but also by the tax treaties in force.

6.2 Pension received from a Finnish source (§ 10 and § 13 of the act on income tax)

6.2.1 From government service (the public sector)

If the pension is received from the State of Finland, a Finnish municipal entity or other public entity, it is sourced to Finland (§ 10.5 of the act on income tax).

However, if the State of Finland is the payor of a pension based on past service in a diplomatic mission located in other countries, it is tax-exemptible if:

The individual beneficiary was a non-resident taxpayer in Finland and not a Finnish citizen during their service period,
The individual beneficiary is a non-resident taxpayer in Finland and not a Finnish citizen when the pension is being paid (§ 76, subsection 1, line 4), and
The decision concerning the individual’s pensions was made on 1 January 1996 or later, and the relevant tax treaty poses no restriction on the residence country against taxing the pension (§ 76, subsection 2).

6.2.2 Pensions earned during past employment with organisations outside the public sector

Pensions earned during past employment, labour and services with a private-sector employer are regarded as Finnish-source income if the location where the employee worked is in Finland (or mostly in Finland) and the employer is or has been Finnish (§ 10, line 5, act on income tax).

Additionally, a pension based on work that a leased employee working for a foreign employer had done in Finland for a service recipient located in Finland pursuant to § 10, subsection 4, paragraph c of the act on income tax is Finnish-source income. It does not matter whether the pension had accrued under a Finnish earnings-related pension insurance policy or another country’s pension scheme, etc., as long as the pension is based on work, assignment or service done in Finland (as referred to in the legal provision).

Correspondingly, if the pensions are based on past employment with a Finnish employer, and the location was mainly in other countries, not Finland, the income is not sourced to Finland under the act on income tax. In cases where the individual beneficiary has had multiple employment contracts at different times and the pensions are based on them, the tax authorities must determine the main location – whether in a foreign country or in Finland – separately for each one of the contracts (ruling KHO 2014:146).

In the same way, other retirement income based on a Finnish insurance company’s motor insurance or on a pension insurance contract, is regarded as Finnish-source income (§ 10, line 5 of the act on income tax).

When an individual beneficiary is a nonresident taxpayer and he or she receives pensions from past employment on board a Finnish vessel or aircraft, either directly or indirectly, the pensions are Finnish-source income (§ 13 of the act on income tax). For example, receipts of seafarers’ pensions are taxed in Finland even if the beneficiary had not worked in Finland.

6.2.3 Voluntary pension insurance

A pension based on a voluntary pension insurance policy taken out in Finland is Finnish-source income (under § 10, line 5 of the act on income tax). Finnish-source income also includes retirement income in the form of pensions from both a voluntary contract signed by the retired individual him/herself and a voluntary contract signed by the employer, provided that the insurance policy was taken out in Finland.

If a pension based on a voluntary pension insurance policy taken out by the employer is directly or indirectly based on work, assignment or service done entirely or mostly in Finland for an employer or a service recipient located in Finland (§ 10, paragraph 5 of the act on income tax), it is also regarded as Finnish-sourced income. It does not matter whether the pension had accrued under a Finnish earnings-related pension insurance policy or another country’s pension scheme, etc., as long as the pension is based on work, assignment or service done in Finland (as referred to in the legal provision).

In addition, a pension other receipts of money that are based on an individual, non-mandatory pension insurance contract made with an insurance company in another state is sourced to Finland insofar as the contributions had been deducted in the past Finnish tax assessments (under § 10, paragraph 12 of the act on income tax).

For more information on pension contracts and on distributions from individual retirement accounts, see the Tax Administration’s instruction “Taxation of income from long-term savings agreements and individual retirement accounts” — Pitkäaikaissäästämissopimuksen ja vapaaehtoisen yksilöllisen eläkevakuutuksen verotus (in Finnish and Swedish).

6.3 The taxation process in Finland

6.3.1 Taxes on pensions paid from Finland to other countries

When the individual beneficiaries are living in a foreign country, the taxation process with regard to pension income sourced to Finland is the same as with beneficiaries who live in Finland. Accordingly, the procedure of preassessment is the same as with Finnish resident individuals who live in Finland. This concerns both non-resident beneficiaries and Finnish resident beneficiaries living in the other Contracting States.

Taxation is carried out in the manner laid down in the act on assessment procedure (Verotusmenettelylaki 1558/1995). After an individual has left Finland to live in other countries for a longer time than one year, there is no longer a Finnish municipality of domicile on record. However, from the perspective of tax assessment, no changes are made to an individual’s municipality of domicile when he or she is still a Finnish tax resident. Even if an individual is a Finnish resident only for a few months of the tax year, he or she must pay municipal income tax for the entire year, which is calculated on the basis of taxable income for purposes of municipal taxes. The tax revenue goes to the Finnish municipality that was on record as the individual’s domicile at the end date of the calendar year preceding the year when he or she left Finland (§ 5, subsection 2 of the act on assessment procedure, and § 5 of the Municipality of Residence Act (201/1994)).

If the individual is a non-resident taxpayer for the entire year, the national average municipal income-tax rate will apply. The national average rate is defined officially for every year. The tax revenue attributed to a non-resident taxpayer’s all taxes goes to the State of Finland (under § 15, subsection 2 of the act on the taxation of nonresidents' income).

The chapters below discuss the taxes in typical cross-border situations from the beneficiaries’ perspective. The text addresses the treatment of pension payments sourced to Finland in accordance with the provisions of the tax treaty – when the source country is Finland, and the beneficiary’s country of residence for treaty purposes is the other Contracting State.

6.3.2 Sweden, Denmark, Norway and Iceland

If the beneficiary’s treaty country of residence is Sweden, Denmark, Norway or Iceland, and pensions sourced to Finland are being paid, Finland, the source country, can tax the pensions. Then, the tax authority of the country of residence will relieve double taxation through the credit method or the exemption method.

Guidance is provided in six different languages about Nordic tax affairs for individuals on a special website (www.nordisketax.net), covering all the Nordic countries and various cross-border events.

6.3.3 Spain

As provided in Article 17, paragraph 2 of the tax treaty, and also in its Article 18, paragraph 2, Finland can tax almost all pensions, social benefits and annuities, paid from Finland to an individual beneficiary resident in Spain.

Finland has the taxing rights with respect to pensions based on past employment in the private sector, disability pensions, distributions from voluntary, individual pension insurance and collective pension insurance, pensions of the self-employed (under the Act no 1727/2006, YEL, past entrepreneurship in business) and pensions of farmers (Act no 1280/2006, MYEL, past operation of agriculture).

Pensions based on services rendered to a public-sector entity in Finland are taxed in Finland. However, if the beneficiary is a Spanish resident and a citizen of Spain, these pensions are only taxed in Spain. If the pensions are based on past employment in Finland with a public-sector organisation that conducts business, the provisions of treaty Article 17 on pensions from the private sector become applicable, meaning that the pensions are taxed in Finland with no importance attached to the beneficiary’s citizenship.

Other classes of pension income that are taxed in Finland are national old-age pensions, guarantee pensions, other pensions and benefits based on legislation on social security or based on the social-security system such as maternity allowance, paternity allowance, parental allowance and unemployment relief. However, the treaty Article on other income applies to the pensions that are based on motor vehicle liability insurance, and these pensions are only taxable in the beneficiary’s country of residence.

6.3.3.1 Reverse crediting

Article 17 of the tax treaty with Spain refers to pensions, social benefits and annuities. Any double taxation that may arise is relieved through an arrangement known as reverse crediting. Accordingly, reverse credit is applicable on Finnish-source pensions based on past employment with the private sector, disability pensions, pensions based on individual or collective pension insurance contracts, the pensions of the self-employed governed by the YEL and MYEL laws (for past entrepreneurship in business, and past operation of agriculture, respectively).

Reverse crediting also applies on pensions based on past employment with Finnish public-sector organisations that conduct business. It is also applied on social benefits paid to beneficiaries in accordance with Finnish legislation on social security.

Reverse crediting means that a pension, social benefit or an annuity paid from Finland to a resident of Spain is taxed in Finland in such a way that when the Finnish Tax Administration assesses the beneficiary’s all taxes for the year, the full amount of tax paid to Spain for the same income will be credited. However, the credit cannot be greater than the amount of taxes to be levied in Finland on the same income. The rules on foreign tax credit laid down by the act on elimination of international double taxation (Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta, 1552/1995) do not apply, because the said act only controls the double taxation caused by income sourced to a foreign country.

Example 1: Spain is Mr “A’s” country of tax residence for purposes of the tax treaty. “A” received pensions from Finland based on his past employment in the private sector amounting to €25,000 during the tax year. Additionally, “A” received €5,000 of wages for working for a Spanish employer. The expenses for the production of that wage income were €1,000. The total amount of tax to Spain is €5,000. The amount credited in Finland is calculated at the ratio of net income: €25,000 ÷ (€25,000 + (€5,000 - €1,000)) × €5,000 = €4,310.34.

6.3.4 Portugal

There is no tax treaty between Finland and Portugal. For this reason, receipts of retirement income sourced to Finland in the hands of a beneficiary who lives in Portugal are taxed in accordance with the rules of Finland’s national legislation.

If the individual living in Portugal is a Finnish resident, he or she must pay tax both on income sourced to Finland and on income sourced to other countries. Finnish tax residents have the general status of tax liability in Finland, which covers all classes of pension income regardless of its country of source.

If the individual living in Portugal is a nonresident in Finland, he or she must pay tax on income sourced to Finland. Sections 6.2.1 to 6.2.3 above describe the various circumstances where a pension a nonresident taxpayer’s hands must be treated as sourced to Finland.

6.3.5 France

Under the Finland–France treaty, the taxing rights on a pension are only given to the country of residence unless the pension is based on past services rendered to the public sector. Pensions based on past service with the public sector can be taxed in the source state if that state, a subdivision, public body or authority of that state was the recipient of the services (Article 19, paragraph 1). The treaty with France provides that other pensions, not those based on public-sector service, are taxed in the residence country only and that the treaty article on other income (Article 21) will apply. From this, it follows that only the country of residence can impose taxes on receipts of national old-age pensions, pensions based on voluntary individual pension insurance contracts, and pensions based on traffic liability insurance.

6.3.6 Italy and Australia

In some tax treaties, the pensioner’s citizenship may affect how a pension from past employment in the private sector is taxed. Citizenship is in the great majority of tax treaties only relevant for the tax assessment of pensions from public service.

Under the treaty between Italy and Finland (SopS 55/1983), if an individual whose country of residence is Italy – who is not a Finnish citizen – receives a pension sourced to Finland, based on social security legislation, the country of source, i.e. Finland, will have no taxing rights on the pension. The pension is taxed in the country of residence only (Article 18, paragraph 2 of the treaty). In contrast with the above, if a Finnish citizen is a tax resident of Italy and he or she receives pensions based on Finland’s social-security legislation, the income may be taxed in Finland but the double taxation of the pension income is relieved in Finland by reverse crediting (Article 23, paragraph 3). For more information on reverse credit, see 4.5.2 and 6.3.3.1 above.

Under the treaty between Finland and Australia (SopS 91/2007), only the country of residence is given the taxing rights on pension income if the individual beneficiary is not a citizen of the source country (Article 17, paragraph 3). This applies on all pension categories i.e. those based on social security, those based on past employment in the private sector, and those based on past services rendered to the public sector.

6.3.7 The Federal Republic of Germany

In accordance with the treaty (SopS 86/2017), all retirement income sourced to Finland may be taxed in Finland. However, Finland does not have the taxing rights on pensions based on past services rendered to the public sector if the beneficiary is a resident of Germany and a German citizen. However, a pension based on past employment with a public entity that operates a business is taxed in Finland.

6.3.8 Repurchase of a pension insurance contract

Repurchase arrangements mostly concern the insurance contracts that are non-mandatory. Typically, repurchases take place after the insurance company has decided to change the original pension insurance contract’s terms and conditions, or when another insurance institution takes over the contracts, which are then reassigned from one insurance company to another. If an individual beneficiary receives money because his or her non-mandatory pension insurance is repurchased, it is taxable as earned income insofar as the contributions had been deducted against earned income in Finnish tax assessment during the preceding years. The remaining part of the received amount is capital income.

Such receipts of money fall under the category where the treaty Article on other income applies. In most tax treaties, the Article on other income only gives the taxing right to the beneficiary’s country of residence. As an exception, some treaties (including Finland–Canada and Finland–Estonia) lay down that the receipts of repurchase money may be taxed in the source country.

6.4 Pensions from Finland and the healthcare contribution of health insurance

A healthcare contribution of a person insured in Finland is imposed on a person who has moved to another country if they are still within the scope of the Finnish social security system after the move. The contribution is also imposed when Finland is liable for compensating the new country of residence for the person’s medical expenses (chapter 18, § 6 of the Health Insurance Act). Finnish authorities would impose the contribution even if the pension were only taxed in the country of residence, because treaty provisions do not affect the way insurance contributions must be paid.

You have an exemption from the healthcare contribution if you present a certificate issued by the Social Insurance Institution of Finland, Kela, stating that you have no coverage in Finland, and by virtue of the EU Regulation 883/2004 on social security, it does not fall under Finland’s responsibility to reimburse medical-care expenses to the authorities of the new country of residence when the country is in the EU or ETA or the country is Switzerland. The departure of the United Kingdom from the EU does not affect Finland’s responsibility to reimburse expenses. This way, the healthcare contribution for a pension paid to the UK will be determined on the same grounds as before Brexit.

6.5 Allocation of taxing rights to the new country of residence

Often, an individual beneficiary who leaves Finland becomes a resident taxpayer both in Finland and in the new country of residence; this is known as a double residency status. In these circumstances, the tax treaty will determine the Contracting State in which the person is resident for purposes of applying the tax treaty.

The provisions that address the double residency problem are found in Article 4, paragraph 2 of the treaty. Accordingly, the Contracting State where the individual has a permanent home available is the country of residence.

If the individual who receives pensions has a permanent home available in both Contracting States, he or she is a resident of the Contracting State with which their personal and economic relations are closest (centre of vital interests). When this treaty article is interpreted by Finnish tax authorities, the practice has been to attach more importance to personal relations (family). This means that if an individual is primarily living together with family in the permanent home located in the other Contracting State, the centre of vital interests is located there, even if there are significant economic ties with Finland.

If an individual has no permanent home available in either Contracting State, or if it cannot be determined in which one of the Contracting States the centre of vital interests is, he or she is a resident of the State where he or she has a habitual abode. The practice has been to count the days of presence in one or the other State.

If an individual is habitually present in several countries on a permanent basis, or is not present in any country, the country of residence for treaty purposes is the individual’s country of citizenship. It is quite uncommon to determine the country of residence for treaty purposes by citizenship.

The reassignment of the taxing rights on a Finnish-source pension to the beneficiary’s country of residence requires that the beneficiary be treated as a treaty resident of the other Contracting State. In other words, the beneficiary must have moved to the other country on a true and permanent basis. If after departure, the beneficiary of pensions has no permanent home remaining in Finland, the above requirements are in most cases fulfilled. In these circumstances too, Finland the source country can still levy tax on a pension paid from Finland. The double taxation will be eliminated in the country of tax residence, unless the relevant tax treaty sets out reverse crediting.

However, if you still have a living accommodation in Finland and you also often stay in Finland, it will be more complicated to determine where your pensions should be taxed. Determining your country of residence requires careful consideration of your overall situation. Taxing rights on pensions cannot be transferred until a sufficient written account is submitted and, for example, the facts and circumstances below have been addressed:

The beneficiary of pensions must describe their living arrangements and dwelling:
- Proof has been provided that a permanent home is available in the other Contracting State (established tax-assessment practice is to regard one year, as a minimum, a sufficient period of making a dwelling available). Acceptable proof is constituted by a photocopy of the contract of purchase of a dwelling, or a photocopy of a lease or rental agreement.
- Proof has been provided on that you have relinquished your permanent home in Finland, e.g. a photocopy of the contract of sale, a statement showing that you had given notice on your rental contract, or an account stating that you rented out your own apartment to a tenant.
Information must be provided on the place where the beneficiary’s family members live.
After moving away, does the beneficiary spend time in Finland – if so, the count of days of presence must be stated.
Information on the beneficiary’s future income from sources in Finland after moving away must be provided, including whether he or she operates business in Finland.
By reference to a statement of the country’s tax authority, the beneficiary’s country of residence is that Contracting State.
- The consequence of the above is that the country of residence can impose taxes on income sourced to Finland and other countries (having the taxing rights on worldwide income). The Finnish Tax Administration’s form called “Certificate of residence and tax liability” can be completed (Form 6132f). However, forms issued by the authorities of foreign countries provide similar information, i.e. the tax authority of the country concerned affirms that the individual beneficiary’s country of residence pursuant to the tax treaty is the said country.
Whether or not the individual is covered under Finland’s residence-based social security
- The individual is a holder of the Social Insurance Institution’s – Kela’s – certificate that indicates that coverage under the residence-based social security in Finland has ceased, or of a certificate confirming that he or she has relinquished the personal Kela Card.
It is required that the beneficiary has submitted a notice of departure from Finland to the Finnish registration authority

If you have left Finland and you are a beneficiary of pensions, you can request a tax card for your Finnish-source pension by submitting Form 6207a — Application for tax at source card and/or tax card – Persons moving to or living in a foreign country. The card will take account of the provisions of the tax treaty applicable to your pension.

If treaty provisions prevent the taxation in Finland of a beneficiary’s pension, the earliest point in time when the taxing rights can be reassigned would be the date when both the departure date from Finland has passed (or it is the current day’s date) and when the certificate issued by the residence country is in effect, proving that the new residence country is the beneficiary’s treaty country of residence.

Example 2: If an individual moves from Finland to Spain halfway through the year, the exact date will affect his or her tax assessment for the year of the move. If the beneficiary moves to Spain at the end of the year so that they do not stay in Spain for more than 183 days during the calendar year, they are not liable for paying tax in Spain for any period during that year under the country’s national laws, and they are not considered a treaty resident of Spain.

Because the beneficiary is not a resident for treaty purposes, the tax treaty between Finland and Spain does not restrict Finland’s right to levy tax for the calendar year in question. The Finnish Tax Administration can levy tax on the beneficiary’s income including both pensions and other types of income for the entire year. The same applies if the person moves from Spain to Finland part way through the year and has stayed in Spain for no more than 183 days during the calendar year. However, in this case Finland would have no right to tax any income that the individual had received from other countries before moving to Finland, provided that he or she was a nonresident taxpayer in Finland before moving back.

If the beneficiary moves from Spain to Finland or has moved from Finland to Spain at such a time that their stay in Spain does exceed 183 days during the calendar year, he or she must pay tax to Spain for the entire calendar year based on Spanish internal law. However, under the treaty, a person can be a resident of Spain only up to the day when they move away from Spain, or starting on the day when they arrive in Spain. The treaty can thus restrict Finland’s taxing rights up to the day when the individual beneficiary arrives in Finland or as of the day when they leave Finland.

Example 3: An eight-month rental contract for a place to live in Spain was signed by “Y”, a citizen of Finland. The contract and Y’s stay begin 1 September (of year 1), ending 30 April (of year 2). After signing the contract, “Y” submits a Notification of moving away to the Local Register Office in Finland, indicating that Y’s new address is the rental dwelling in Spain. During the summer months of year 2, the dwelling is made available to its owner again. However, “Y” signs a repeated rental contract with the start date 1 September (of year 2). Y’s spouse has remained to stay in Finland in the family home. “Y” spends time in Finland starting 1 May up to the end of August. “Y” receives pension from a Finnish source, based on past employment in the private sector.

During the first year in this example (year 1), the Tax Agency of Spain does not consider “Y” a resident of Spain, and consequently no Spanish tax is levied on Y’s Finnish-sourced pension because the count of days present in Spain is below 183 per calendar year. Next year (year 2), the Spanish authorities issue a residency certificate to “Y” because the count of days spent in Spain exceed 183 per calendar year. In addition, because of Y’s living abroad, the Social insurance institution (Kela) in Finland issues “Y” a decision on termination of Y’s residence-based social security in Finland. When filing the tax return for the year to the Finnish Tax Administration, “Y” demands that under the tax treaty, “Y” must be treated as a resident of Spain because only the summer months of the year are spent in Finland.

The demand notwithstanding, “Y” is a tax resident of Finland under the tax treaty. This means that full liability to tax on worldwide income concerns “Y” for the entire period on the grounds of the permanent home in Finland, and because the family members live in Finland on a permanent basis, and additionally because the Spanish dwelling is rented, i.e. not permanent.

Example 4: Mr A submitted a Notice to the Finnish registration office that he leaves Finland to start living in Spain as of 1 July 2024. In accordance with the residency certificate issued by the Tax Agency of Spain, he is considered a resident of Spain from 1 January 2024 onwards. Starting on 1 July 2024, the treaty country of residence is Spain.

For more information about the tax treatment of pensions paid from Finland to beneficiaries residing in Spain, see section 6.3.3 above.

Annex 1: Allocation of taxing rights as provided in the Tax Treaty, pensions from foreign payors to beneficiaries in Finland

Note: The information in this table is a general guide only; look up the relevant treaty for exact instructions.

V = the exemption method*
H = the credit method
Y = the exclusive taxing right is given to Finland


The country from where pensions are paid	Pensions based on social security legislation	From government service (the public sector)	Other pensions based on past employment in the private sector, annuities and based on past employment with public entity conducting business
The Netherlands and Zambia Australia	V H ¹⁾	V ²⁾ H ¹⁾	H Y
United Arab Emirates, Argentina, Azerbaidzhan, Barbados, Indonesia, Kazakhstan, Moldova, Uzbekistan, Turkmenistan, Hong Kong and Sri Lanka (as of 2019)	H ¹¹⁾	V ^{2) 3)}	H
Armenia, Belgium, Bosnia-Herzegovina, Brazil, Ireland, Israel, Kyrgystan, Croatia, Macedonia, Mexico, Pakistan, Serbia and Montenegro, Singapore, Slovakia, Slovenia, Tadzhikistan, Thailand ⁷⁾, Czech Republic, Ukraine, Uruguay and Vietnam	H	V ²⁾	Y ¹²⁾
Bulgaria	V	Y	Y
Spain	H ¹³⁾	V ²⁾	H ¹³⁾
Egypt and France	Y	V ⁴⁾	Y
Italy ⁷⁾, Switzerland and Tanzania	Y	V ²⁾	Y
China, Morocco and Poland	H	V²⁾	Y
Philippines ⁵⁾, Austria, Korea, Greece, Cyprus, Hungary, USA and New Zealand	V	V ²⁾	Y ⁵⁾¹²⁾
United Kingdom, Malta and Romania	V	V ²⁾	V
Japan Canada	Y H	H ¹⁰⁾ H	Y H
Latvia, Lithuania and Estonia Luxembourg, Malaysia	V V	V ²⁾ V	H ⁶⁾ Y
Nordic countries ⁹⁾	H	H	H
The Russian Federation ¹⁴⁾ and South Africa	V	V	V
India, Germany Turkey	H V ²⁾	V ²⁾ V ²⁾	H Y ⁸⁾

1) the value is Y if the beneficiary is not an Australian citizen
2) the value is Y if the beneficiary is a citizen of Finland
3) pensions sourced to Barbados fall under the exemption method regardless of the beneficiary’s citizenship
4) the value is Y if the pensions are not based on past services rendered to the public sector or on civil service (France)
5) Finland’s treaty with Philippines excludes municipal income taxes; receipts of private-sector pensions may still be taxed in Philippines (H) if they are based on a Philippine enterprise’s pension arrangement, not registered as referred to in Philippine legislation
6) the value is Y if the beneficiary has no citizenship, or is a citizen of Finland and not a citizen of the source country simultaneously
7) the source country may tax its citizens’ receipts of pension based on social-security legislation, but the source country must relieve any resulting double taxation
8) the value is V 2) if the pensions are based on past employment with a public org. conducting business
9) the value is V if the receipts of pension are “old” (start date 4 Apr 2008 or earlier, see this memorandum’s section 5.2)
10) the value is V if the beneficiary of pensions sourced to Japan is a Japanese citizen
11) the value is V if the receipts are sourced to Argentina and they are seen as tax-exempt social-security allowances there
12) the value is H if the source country for annuities is Belgium, Brazil, Israel, Cyprus, Mexico, Slovakia, Tadzhikistan, Czech Republic or Uruguay
13) The pension is taxed in Finland and Spanish authorities give credit for the tax paid to Finland (reverse credit).
14) Starting 30 June 2026, to apply the Finland–Russian Federation tax treaty is suspended. After this (from 1 July 2026), there is no applicable treaty with Russia and the rights to levy tax on a pension is determined in accordance with Finland’s internal legislation.

Annex 2: Allocation of taxing rights as provided in the Tax Treaty, pensions from Finland to beneficiaries in foreign countries

Note: The information in this table is a general guide only; look up the relevant treaty for exact instructions.

x = the income may be taxed in Finland in accordance with the Treaty
– = shall be taxable only in the residence country acc. the tax treaty


Country of residence	Social-security-related pensions including Employees Pensions Act, YEL & MYEL laws, seafarers’ pension, workers' compensation, nat’l old-age pension, survivors' pension	From government service and based on past employment with a public entity conducting business	Voluntary pension contracts, signed by the individual beneficiary or by the employer	Other pensions including traffic liability insurance or other insurance contract for accident risk coverage
The Netherlands	x¹⁰⁾	x⁵⁾	x⁸⁾¹⁰⁾	-
Australia	x²⁾	x²⁾	-	-
Egypt	-	x¹⁾	x	x
Japan, France ⁹⁾	-	x¹⁾⁴⁾	-	-
Albania, Azerbaidzhan, Belgium, Georgia, Hong Kong, Israel, Kyrgystan ¹¹⁾, Cyprus, Macedonia ¹¹⁾, Malta, Moldova, Romania, Singapore, Slovakia, Tadzhikistan, The Czech Republic, Turkmenistan, Ukraine, Belarus	x	x^{5) 15)}	x	-
Bosnia-Herzegovina, Ireland, Austria, Republic of Korea, Greece, Croatia, Luxembourg, Serbia and Montenegro, Switzerland, Hungary, U.S.A.	x	x⁵⁾	-	-
Malaysia, Bulgaria	x	x	-	-
Barbados, South Africa, Iceland, Canada ⁷⁾, Norway, Sweden, Denmark	x	x	x	x
Armenia ¹¹⁾, The Russian Federation ¹⁶⁾	x	x	x	-
United Arab Emirates, Argentina, Brazil, United Kingdom, Philippines, Indonesia, India, Kazakhstan, Pakistan, Zambia, Thailand, Uruguay, New Zealand, Uzbekistan, Sri Lanka Vietnam	x	x⁵⁾¹⁴⁾	x	x
Tanzania	-	x¹⁾³⁾	-	-
Spain	x	x¹³⁾	x	-
Poland	x	x⁵⁾	x	-
Latvia, Lithuania and Estonia	x	x⁵⁾	x⁶⁾	x
Mexico	x⁸⁾	x⁵⁾	x⁸⁾	x
Italy	x²⁾	x⁵⁾	-	-
China, Morocco and Germany	x	x⁵⁾	x	x
Turkey	x³⁾	x³⁾	x	x
Slovenia	x¹¹⁾	x⁵⁾¹²⁾	x¹¹⁾	-
other State	x	x	x	x

1) the value is “–” if the pensions are based on past employment with public org. conducting business
2) the value is “–” if the beneficiary is not a Finnish citizen
3) the value is “–” if the beneficiary is a citizen of the country of residence
4) the value is “–” if the pensions are not based on past services rendered to the public sector
5) the value is “–” if the beneficiary is a citizen of the country of residence and the pensions are not based on public-sector org. conducting business
6) the value is “–” if the beneficiary is a citizen of the country of residence, and not a citizen of Finland simultaneously. If the beneficiary is a citizen of Finland, the maximum tax is 15%
7) maximum tax on pensions is 20%. Max. tax on purchased-pension contracts (annuities) is 15%, provided that when the contributions were paid in, they were not tax-deductible, fully or partially
8) maximum tax on pensions is 20%
9) a special agreement controls locally hired employees in Finland’s diplomatic mission in France
10) the value is “–” if the beneficiary, already on Dec 20, 1997, lived in the Netherlands and held the rights to receive the pension before Dec 20, 1997
11) maximum tax is 25%
12) maximum tax is 25% if based on past employment with public org. conducting business.
13) However, if the pension is based on past service to the public sector (non-business), the value is “–” if the beneficiary is a citizen of Spain.
14) However, Sri Lanka is X even if the beneficiary were a citizen of the country of residence if he/she also is a Finnish citizen and a tax resident of Finland. This means that if a beneficiary has received pensions from the public sector that are not related to the conduct of business by the public organisation, Finland is under obligation to give credit for the tax paid to Sri Lanka.
15) This value is “–” if the beneficiary is a tax resident of Hong Kong and a holder of a permit for residence in Hong Kong.
16) Starting 30 June 2026, to apply the Finland–Russian Federation tax treaty is suspended. After this (from 1 July 2026), there is no applicable treaty with Russia and the rights to levy tax on a pension is determined in accordance with Finland’s internal legislation.

Page last updated 9/30/2026

Taxation of pension income in cross-border circumstances Detailed guidance

1 Introduction

2 Resident and nonresident tax liability

3 The pension income concept

4 Tax treaties

4.1 Introduction to treaty articles on pensions

4.2 Pensions based on legislation on social security

4.2.1 Statutory old-age pensions, pensions to people unable to work and pensions to the unemployed

4.2.2 The pension in accordance with the Act on occupational diseases and accidents

4.2.3 Employer-provided additional pension coverage

4.2.4 Survivors' pension

4.2.5 Other distributions based on social security legislation

4.2.6 Pension based on motor vehicle liability insurance

4.3 Other pensions based on past employment in the private sector

4.4 Annuities

4.5 Individual retirement insurance contracts and other pension arrangements on a non-mandatory basis

4.6 Relief for international double taxes on a pension

4.6.1 The credit method and the exemption method

4.6.2 Tax-treaty articles on reverse crediting

4.6.3 The ceiling rule in tax assessment

5 Taxes on a foreign-source pension received by a Finnish resident

5.1 General remarks about taxes on pensions sourced to other countries

5.2 Sweden, Denmark, Norway and Iceland

5.2.1 Tax paid to Sweden, subject to crediting in Finland

5.3 Estonia

5.4 The Federal Republic of Germany

5.5 The United States of America

5.5.1 Distributions from U.S. retirement accounts known as the 401(k) and IRA

5.6 Individual retirement accounts and other pension insurance on a non-mandatory basis

5.7 Receiving refunds of pension insurance contributions or premiums and lump-sum withdrawal of pension savings

5.8 The United Nations (UN)

5.9 The European Union (EU)

5.10 Pensions from foreign payors to Finnish residents and the healthcare contribution of health insurance

5.10.1 How the healthcare contribution of health insurance is determined

5.10.2 The healthcare contribution of health insurance in the case of a pension sourced to Sweden

6 Taxes on a pension sourced to Finland

6.1 General remarks about Finnish taxes on pensions

6.2 Pension received from a Finnish source (§ 10 and § 13 of the act on income tax)

6.2.1 From government service (the public sector)

6.2.2 Pensions earned during past employment with organisations outside the public sector

6.2.3 Voluntary pension insurance

6.3 The taxation process in Finland

6.3.1 Taxes on pensions paid from Finland to other countries

6.3.2 Sweden, Denmark, Norway and Iceland

6.3.3 Spain

6.3.3.1 Reverse crediting

6.3.4 Portugal

6.3.5 France

6.3.6 Italy and Australia

6.3.7 The Federal Republic of Germany

6.3.8 Repurchase of a pension insurance contract

6.4 Pensions from Finland and the healthcare contribution of health insurance

6.5 Allocation of taxing rights to the new country of residence

Annex 1: Allocation of taxing rights as provided in the Tax Treaty, pensions from foreign payors to beneficiaries in Finland

Annex 2: Allocation of taxing rights as provided in the Tax Treaty, pensions from Finland to beneficiaries in foreign countries