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Taxation in retirement
When you receive a pension decision from Finland or from abroad, you should ask the Tax Administration to send your tax card for pension income to the payer of the pension. In this way, your taxation will be up-to-date. Later Kela and the authorised pension providers will receive the information automatically from the Tax Administration, and the tax card will no longer have to be sent separately if you ask to have your tax rate changed due to, for instance, other income.
For the tax card for pension income you need
- the pension decision for the new pension and
- details on income, preliminary tax withholdings and deductions for the start of the year.
When you have sent your tax card for pension income to Kela, your pension is taxed according to the tax card and not at the rate of 40% as determined in the decision of the Tax Administration.
Your pension providers will at the beginning of the year send you a statement showing the amounts of your pension payments and the amounts withheld from your pensions in the previous year. They are also shown on the pre-completed tax return that you receive in the spring. Pensions from abroad are often missing from the pre-completed tax return. Details on such pensions must be reported to the Tax Administration.
If you live abroad and you receive a national pension from Finland, the pension will, in the main, be taxed in the same manner as the national pension of a person who lives in Finland.
Taxation of other income in retirement
While drawing an old-age pension you can work as much as you like. The wages will not affect your pension. You have to pay taxes on your earnings, however. Earnings-related pension rights accrue from work done while drawing an old-age pension. Starting from the beginning of 2017, the earnings-related pension accrued from work while drawing an old-age pension will also reduce your national pension.
If you work while on a disability pension, you should check how much you can earn so that the earnings do not affect the continuing of your pension. If the income limit is exceeded, the payment of the pension is interrupted. If you receive a pension also from an authorised pension provider, you should check the income limit for the earnings-related pension with the pension provider.
Repayment of preliminary tax withholding
Excess amounts of preliminary taxes that have been withheld can be repaid to the customer, if the customer sends a revised tax card with retroactive effect to Kela. The preliminary tax withholding rate on the revised tax card must also be lower than the withholding rate used hitherto. For the national pension and the guarantee pension, two separate revised tax cards are needed.
As regards pension benefits, Kela automatically corrects the preliminary tax withholding retroactively when the revised tax card has arrived at Kela. As regards other benefits, the customer must also ask Kela to correct the preliminary tax withholding.
Excess amounts of preliminary tax withholding can only be repaid during the year that tax is paid. If the payment date for the repayment of preliminary tax withholding is delayed to the next year, the excess amount of preliminary tax withholding can no longer be repaid.