Swedish pensioners lose NHR benefits

Swedish pensioners who are thinking of retiring to Portugal may have to think again after the Swedish government tore up an agreement allowing its retired citizens in Portugal to enjoy tax exemption status.

On Wednesday, the Swedish parliament voted to end the tax agreement with Portugal which allowed tax exemptions for Swedish pensioners who have signed up to the NHR regime in recent years.
“Under Swedish tax law, pensions should be taxed in Sweden if they were paid by Sweden to a person living overseas. In other word, Swedish pensioners should be taxed in their counties of origin,” states the ruling in the Swedish parliamentary circular Riksdag.
The Swedish government had been waiting for an agreement signed in 2019 between the two states to be ratified and now has revoked NHR status in the same way that Finland had done.
“The tax agreement with Portugal establishes that specific pensions are not taxed either in Sweden or Portugal. Following the negotiations with Portugal in 2019, Sweden altered its provisions to enable private pensions to be taxed in Sweden”.
“Despite considerable pressure, Portugal has not met its part of the agreement. The agreement should therefore be revoked,” states the communiqué.
The tax agreements will terminate on 31 December 2021, meaning that Swedish pensioners living in Portugal will start being taxed on their pensions originating from Sweden from 1 January, 2022.
From January, Sweden will be able to deduct IRS from pensions who receive their monthly pensions via the national system which before had been exempt from tax in both countries.
According to the latest statistics from the Ministry of Finance, 3,150 Swedish pensioners with NHR status are currently living in Portugal.