Finns see double tax exemption under threat

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The number of Finnish pensioners choosing Portugal to live for tax purposes has passed the 500 mark for the first time. They are attracted by the possibility of paying 0% personal income tax (IRS) under Portugal’s Non-Habitual Residents regime (NHR). In 21017 there were 500 Finns registered as living in Portugal on the back of a tax agreement signed between the two countries 50 years ago.  Under the double-taxation scheme, Finns don’t pay income tax in either country. But that looks set to change.


Pensioners from Finland living in Portugal may no longer benefit from the double-taxation exemption scheme that has brought a record number of Finnish pensioners to retire in Portugal.

The Finnish Government now wants to tax pensioners who enjoy the NHR regime in Portugal for 10 years and is pressuring the Portuguese Government to sign a new tax convention which, if signed, will allow Helsinki to tax pensioners.

The Finnish Minister of Finance has admitted there are 500 pensioners in this situation. In 2004 there were 245 Finnish pensioners living in Portugal. In 2015 that number jumped to 440 and 490 in 2016. Last year the number stabilised at 500.

To be classed as NHRs, EU citizens must spend over 183 days per year in Portugal (either continuously or overall) and have a property classed as their main residence (owned or rented). Since 1971 Portugal and Finland have had a double taxation agreement (to avoid a citizen being taxed in both countries).

But when Portugal started to be viewed as a tax paradise for pensioners, exempt from IRS on pensions, Finns benefited from double exemption.  Now the Finnish Government led by Juha Sipila is requesting a revision of the bi-lateral convention. In 2016 Lisbon and Helsinki signed a new agreement allowing the Finns to tax their retired citizens living in Portugal. However, the document has not been ratified by the Portuguese parliament. Either way, the Finnish Government says it may begin taxing its pensioners in Portugal from 2019.