alexander stubb.jpg

Finland “reaches deal to plug income tax loophole” for retirees in Portugal

Finnish tax officials have finally “managed to tie up a loose end that has allowed Finnish retirees living in Portugal to avoid paying income taxes on private sector pensions”, reports Finnish news website YLE this weekend.

Portuguese Finance Ministry officials have reportedly agreed to a bilateral treaty with Finland to terminate what YLE calls “a tax holiday provided to pensioners resident Portugal”, but which is in fact nothing more than the previously much-lauded tax regime for so-called non-habitual residents.

It is a scheme that tax consultants Price Waterhouse Coopers have dubbed “Europe’s best kept secret” – and one that has boosted Portugal’s property sales market massively since coming into effect in 2009.

It is also one that has seen hundreds of Finnish pensioners move to Portugal, selling up any properties they may have had in their native country.

Thus when Finland’s thrust to overturn the scheme first came to light, expat Finns in the Algarve wrote to the Resident saying how basically unfair this would be.

“In practice Finland is proposing to build a kind of taxpayers’ prison and is thus endangering the EU’s principle of freedom of movement between Member States,” explained Pekka Lehtikari.

“Why should we pay taxes to a country we don’t live in? Finland’s present agreement is favourable for Portugal and is in line with the OECD Model Tax Convention”.

But clearly Finland’s Finance Minister Alexander Stubb has a different view.

His ministry announced on Saturday that it had received a letter from its Portuguese counterpart confirming its willingness to lift the 10-year tax exemption to Finnish pensioners.

“Finance Minister Alexander Stubb said that the breakthrough represented the fruit of many years of negotiations”, adds the website, stressing that a similar deal has already been signed with Spain.

Portugal’s “generous taxation regime” has been singled out in Finland following reports that “several influential figures in business and politics have relocated to take advantage of the tax holiday”.

The so-called tax refugees include former chief executive of Nokian Tyres Kim Gran, ex-CEO Matti Halmesmäki of the Finnish food and general retail group Kesko, and former CEO Sakari Tamminen of the metals company Rautaruukki, says YLE.

Now, Stubb’s eyes are now said to be set on overturning similar tax perks offered to elderly compatriots living in France.

[email protected]