Pension

The pension paid to non-residents in Estonia is taxable income. As a rule, income tax on pension is withheld and declared to the Estonian Tax and Customs Board by the payer of the pension. The Estonian pension system is based on three pillars: state pension, mandatory funded pension and supplementary funded pension.
 

Obligations of a non-resident recipient of pension


As a rule, income tax on pension is withheld and declared to the Estonian Tax and Customs Board by the payer of the pension.

The taxation of pension in Estonia depends on the type of pension as well as on the rules which have been agreed relating to a particular type of pension in the convention for the avoidance of double taxation with income tax (tax treaty) concluded between Estonia and a foreign country.

The recipient of the pension must, depending on the type of pension and the country of residence with which the tax treaty has been concluded, submit a certificate of residency or a life certificate to the payer of the pension once a year, on the basis of which the pension is exempted from withholding Estonian income tax upon payment if the tax treaty concluded with the respective country provides for exemption from tax.

If the payer of the pension has withheld income tax correctly at the rate provided for in either the Income Tax Act or the tax treaty (lower rate), the non-resident recipient of pension does not have to submit the income tax return.

If Estonia has not concluded a tax treaty with the country of residence of the recipient of pension or if the treaty does not provide for a pension exemption, the tax rate prescribed by the Estonian law shall apply. The payer of the pension cannot deduct basic exemption when making the payment to a non-resident. If a recipient of pension is a resident of another contracting state of the European Economic Area (EEA), he or she can apply the Estonian basic exemption at the rate allowed in Estonia and other deductions provided for in the Income Tax Act if he or she submits the income tax return for a resident natural person by 30 April of the year following the year in which the pension was received.

Please consult also detailed information on the tax rates applied to pensions in Estonia.
 

Tax exemptions arising from tax treaties


In all of the following cases, it is important to know that the tax treaty exemptions can be used only in the case there is a valid certificate of residency or a life certificate confirmed by a foreign tax authority.

I pillar: state pension

Pension disbursements paid by the Social Insurance Board to persons of retirement age in Estonia is exempt from tax for the residents of the following countries with which Estonia has concluded the tax treaties for the avoidance of double taxation:

Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Croatia, Cyprus, Czech Republic, France, Georgia, Germany, Great Britain, Greece, India, Ireland, Isle of Man, Italy, Japan, Jersey, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Norway, Poland, Portugal, Serbia, Singapore, Slovak Republic, Slovenia, South Korea, Spain, Switzerland, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, Uzbekistan, Vietnam.

Additional information

Should you have any questions about applying for a pension, please contact the Social Insurance Board: www.sotsiaalkindlustusamet.ee, telephone 612 1360, e-mail info@sotsiaalkindlustusamet.ee.

II pillar: mandatory funded pension

A person is of retirement age

Payments of mandatory funded pension to the persons of retirement age are exempt from taxes for the residents of the following countries with which Estonia has concluded the tax treaty for the avoidance of double taxation:

Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Croatia, Cyprus, Czech Republic, France, Georgia, Germany, Great Britain, Greece, India, Ireland, Isle of Man, Italy, Japan, Jersey, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Norway, Poland, Portugal, Serbia, Singapore, Slovak Republic, Slovenia, South Korea, Spain, Switzerland, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, Uzbekistan, Vietnam.

Before the retirement age

Payments are exempt from tax if a tax treaty has been concluded with the country concerned.

Additional information

Webpage of the Ministry of Finance: Restructuring of the second pillar of the funded pension

If you have questions about the application for the second or third pillar pensions, please contact the Pension Centre: www.pensionikeskus.ee, telephone 640 8886, e-mail info@pensionikeskus.ee.

III pillar: supplementary funded pension

Person is of retirement age

Payments of the third pillar pension to the persons of retirement age are exempt from taxes for the residents of the following countries with which Estonia has concluded the tax treaty for the avoidance of double taxation:

Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus.Bulgaria, China, Croatia, Cyprus, Czech Republic, France, Georgia, Germany, Great Britain, Holland, Hong Kong, Hungary, India, Isle of Man, Israel, Japan, Jersey, Kazakhstan, Kyrgyzstan, Lithuania, Luxembourg, Macedonia, Moldova, Poland, Romania, Serbia, Slovak Republic, Slovenia, South Korea, Spain, Switzerland, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, Uzbekistan.

Before the retirement age

Payments are exempt from tax if a tax treaty has been concluded with the country concerned.

Additional information

More information on the third pillar pension can be found on the webpage of the Pension Centre: Supplementary funded pension.

If you have questions about the application for the second or third pillar pensions, please contact the Pension Centre: www.pensionikeskus.ee, telephone 640 8886, e-mail info@pensionikeskus.ee.

Income tax on pensions paid to Russian residents


Persons who live in Russia are considered as non-residents for the purpose of Estonian income tax. Therefore, income tax is withheld on their pensions paid from Estonia at the rate of 20%.

Income tax withheld shall be final. This means that a non-resident living in Russia who received a pension from the Estonian Social Insurance Board, on which income tax had been withheld, does not have the right to submit the income tax return of a resident natural person in Estonia to make deductions from taxable income.

Income tax withheld on pension will not be refunded from Estonia to a pensioner who is the resident of Russia.
 

09.09.2021