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Taxation of 3rd pension pillar

Paragraphs

Contributions

The state refunds income tax on the contributions to the third pension pillar. Income tax is refunded on contributions not exceeding 15% of your gross annual income or 6,000 euros per year. This limit applies to contributions made by both yourself and your employer.

Income tax is only refunded if you have paid income tax throughout the year. If your entire income is exempt from tax and you do not pay income tax, income tax refunds are not possible. You must submit an income tax return in order to be refunded income tax.

Disbursements

The funds accumulated in the third pension pillar can be withdrawn at any time.

Retirement payments from the third pension pillar will not increase your annual income. At least 5 years must have passed since the first acquisition of third pillar pension fund units.

All taxable payments before retirement age from the third pension pillar increase your annual income, which is the basis for calculating your basic exemption. Therefore, a third pillar payment may in some cases reduce or eliminate your basic exemption. If the decreased basic exemption has not been taken into account in paying taxes during the year, you will be liable to pay additional income tax from the decreased part of basic exemption.

Payout taxation

  Payment before 5 years from the conclusion of the contract or from the first acquisition of the unit Payment after 5 years from the conclusion of the contract or from the first acquisition of the unit**
  You are not of retirement age * You are of retirement age * You are not of retirement age * You are of retirement age *
One-time disbursement income tax rate 20% 20% 20% 10%
Supplementary funded pension less than a recommended duration - 10% - 10%
Supplementary funded pension of at least the recommended duration, paid at least once every three months - Income tax free - Income tax free
Lifetime disbursement of pension at least once every three months - Income tax free - Income tax free

The legislation governing the tax system may change in the future. Taxation depends on individual circumstances, including your tax residence, etc.

* A person who has entered into an insurance contract for supplementary funded pension or has acquired the units of a voluntary pension fund for the first time from 1 January 2021 is deemed to have reached the retirement age if they will reach the retirement age provided for in the State Pension Insurance Act in five years.

** If the insurance contract for supplementary funded pension was entered into or the person acquired the units of a voluntary pension fund for the first time before 1 January 2021, the retirement age is 55 years. If all the units of a voluntary pension fund owned by a person have been redeemed and the person subsequently re-acquires the units of the voluntary pension fund, such acquisition of units shall be deemed to be the first acquisition of units.

 

If you are an insured person and have been established to have no work ability or no work ability had been established before retirement age - all payout solutions for you are income tax free.

Income tax is 10% if the pension fund or insurer will be liquidated.

The one-time disbursement or supplementary funded pension of at least the recommended duration, paid at least once every three months, made to the heir or beneficiary are subject to income tax at the rate of 20%.

Movement between different savings solutions

 

During the saving period, it is possible to move between different third pension pillar savings solutions and service providers without paying income tax, unless a monetary disbursement is made to you during this period.

When moving between third pillar pension products, the 5 years necessary for being eligible for income tax incentive shall be counted as of the conclusion of the first insurance agreement or the acquisition of the first pension fund units.