Swedish government to rectify tax loophole for pensioners in Sweden, Portugal

According to a 2002 treaty, Swedish tax residents were allowed to receive pension payments tax-free from private pension schemes in both Sweden and Portugal, if they were beneficiaries of the Portuguese Non-Habitual Resident System (RNH). [Shutterstock/Africa Studio]

The Swedish government of Social Democrats and the Greens announced on Monday that it wants to dissolve the agreement which has enabled Swedish pensioners to benefit from tax exemptions in both Sweden and Portugal through a legal loophole.

According to a 2002 treaty, Swedish tax residents were allowed to receive pension payments tax-free from private pension schemes in both Sweden and Portugal, if they were beneficiaries of the Portuguese Non-Habitual Resident System (RNH).

Amendments to the treaty, preventing pensions earned in Sweden from being received tax-free, were negotiated between the two countries in 2019. However, Lisbon has not ratified the agreement and has not taken measures to incorporate the signed protocol into its domestic legislation. 

Last year, Portugal started to tax pensions received in another country at a tax rate of 10%. Sweden considered that move inadequate and one giving Swedish emigrants an unfair advantage.

If the Swedish parliament approves the government’s proposal to end the treaty with Portugal, expat pensioners will be taxed from the beginning of 2022, the same way as those remaining in Sweden. Neighbouring Finland made a similar decision back in 2018.

(Pekka Vänttinen | EURACTIV.com)

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