Former CEOs retire in Portugal
Three former chief executives of major listed companies have recently moved from Finland to Portugal.
Matti Halmesmäki, a 62-year-old former chief executive at Kesko, Sakari Tamminen, a 61-year-old former chief executive at Rautaruukki, and Kim Gran, a 61-year-old former chief executive at Nokian Tyres, have all transferred their residence to Portugal in the course of the spring.
Finns can receive their pensions tax-free by moving to Portugal as the country imposes taxes on neither earnings-related nor supplementary executive pensions. They can qualify for the tax exemption by transferring their residence to Portugal.
The Population Information System shows that Halmesmäki, Tamminen and Gran have all registered as residents of Portugal but remain Finnish citizens.
All three senior industrialists have transferred their residence to Portugal in the course of the year. Halmesmäki has notified the Population Register Centre that he has taken permanent residence in Lisbon and Gran that he has taken permanent residence in the western region of Algarve. No detailed information about the residence of Tamminen in Portugal was available.
The tax exemption can only be granted upon an application filed with the tax administration of Portugal.
Helsingin Sanomat enquired on Monday and Tuesday whether Halmesmäki, Tamminen and Gran have applied for the exemption but was unable to access the information due to the strict tax regulations of Portugal.
The daily also failed to reach Halmesmäki, Tamminen and Gran for a comment.
Tamminen emphasised in a text message to the daily last Friday that he has earned his wage and benefits in Espoo, which was his home municipality prior to his move to Portugal. He declined on Monday and Tuesday to shed further light on his tax situation or place of residence.
The employment contracts of the former chief executives include exceptionally generous pension clauses that effectively guarantee them a certain level of income after retirement. Their pensions have been determined on the basis of their earnings in the twilight years of their careers. Tamminen, for example, received a 478 per cent increase in his executive bonuses last year.
Calculations made by Helsingin Sanomat suggest that Halmesmäki is enjoying an annual pension of roughly 600,000 euros, Tamminen of roughly 500,000 euros and Gran of roughly 400,000 euros. Their monthly pension is therefore roughly 50,000 euros, 41,666 euros and 33,333 euros respectively.
Finns, in contrast, receive an average monthly pension of 1,588 euros, which is subject to regular income tax. In addition, Finnish retirees are obliged to pay a surtax if their annual pension income exceeds 45,000 euros.
The tax exemptions offered by Portugal are based on a bilateral tax treaty adopted in the mid-1970s. The treaty stipulates that Finland cannot impose taxes on the pensions of people residing permanently in Portugal if their pensions have been accrued through employment in the private sector. Pensions accrued through employment in the public sector are subject to taxes by Finnish tax authorities.
Portugal, in turn, has decided not to impose taxes on the pensions of foreigners in an attempt to encourage them to take residence in the country.
The bilateral tax treaty is beneficial especially for people receiving executive pensions as Finland is unable to impose taxes on the supplementary pensions paid by corporations. Halmesmäki, Tamminen and Gran all receive such supplementary pension benefits from their former employers.
Finns paying supplementary pensions to themselves are liable for taxes regardless of their country of residence.
Finland has expressed its willingness to re-negotiate the tax treaty by the end of the year in order to be able to impose taxes on pensions paid to Portugal. The Ministry of Finance is, thereby, eager to abolish what it perceives is an unjust system.
As the negotiations have yet to be wrapped up, Finns who have retired in Portugal continue to pay no taxes on their earnings-related pensions to either Finland or Portugal. The tax benefits offered by Portugal stirred public debate earlier this year after Maarit Toivanen-Koivisto, a major shareholder in Onvest, told Helsingin Sanomat that she and her family will move to Portugal to avoid inheritance tax.
