We recommend you to read the information on the pension reform 2021 on the website of the Pension Center.
The table below helps to understand which pension-related payments are tax-free and which payments shall be taxed from 1 January 2021.
I pillar: State pension |
II pillar: Mandatory funded pension |
III pillar: Supplementary funded pension |
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Before reaching the old-age pension age, a person has the right to a flexible old-age pension. | ||
The following is subject to income tax at the rate of 20%: |
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The following is subject to income tax at the rate of 10%: |
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Tax free is: |
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What kind of payments shall affect basic exemption (up to 6,000 euros per year)? |
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State pensions are taken into account as taxable annual income and affect the calculation of a person's basic exemption. | Payments made before the III pillar retirement age, which are subject to income tax at the rate of 20%, are taken into account as annual income and affect the calculation of a person's basic exemption. | |
What kind of payments shall not affect basic exemption (up to 6,000 euros per year)? |
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shall not reduce a person's basic exemption. | ||
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Entries within II pillar, including the transfer of insurance pension or fund pension money to a pension investment account, shall not be considered as payouts and shall not give rise to any tax liability.
Notes
* The retirement age of the II pillar is the retirement age or five years before reaching that age.
** The retirement age for those who joined the III pillar until 2020 is 55 years, and for those who have joined from 2021, the retirement age is similar to the II pillar.
*** Term pension is calculated at least for the calendar year preceding the previous calendar year corresponding to a person's age on the basis of the average number of years remaining for men and women published by Statistics Estonia. More information on the Pension Centre's website or at the e-mail address info@pensionikeskus.ee.
**** The retirement age is calculated according to the year of birth (more information on the web site of the Social Insurance Board: "Old-Age Pension"). The pension under favourable conditions does not change taxation.