New Finland-Spain Tax Treaty Effective 2019
A new tax treaty between Finland and Spain, which will broaden the Finnish Government’s taxing rights with respect to pension income, will be effective from 2019, according to the Finnish Ministry of Finance.
The ministry said in a release issued on May 17 that under the existing tax treaty, pension income paid to residents of Spain is only taxed in Finland in the case of public sector pensions. The revised treaty will allow Finland to tax all pensions paid from Finland to residents of Spain, including private sector pensions.
Private sector pensions will, nevertheless, continue to be taxed according to the existing treaty clauses for three years under a transition rule. However, in cases where a pension is treated as tax-exempt income in the country of residence, the new tax treaty will apply without the three-year transition period.
The new tax treaty also strengthens Finland’s right to tax rental income and capital gains derived by persons resident in Spain from residential apartments located in Finland.
Finland and Spain approved the new text in April 2016 and April 2018, respectively. According to the ministry, the revised treaty will enter into force on July 30, 2018, and will be effective from January 1, 2019.
