Estonia, Financial Services, Pensioners, Taxation

Altogether 204,700 pensioners, making up 61 percent of all pensioners, are estimated to receive over 6,000 euros per year in pension or in pension and wages combined in 2020, Minister of Social Affairs Tanel Kiik said in a letter to MP Signe Riisalo.  

The tax exempt income in Estonia is 6,000 euros a year or 500 euros a month, and pensions as well as wages are counted as income for that purpose.

In his response to the MP, the minister presented data about both the number of persons receiving a pension alone whose pension will be higher than 500 euros a month in 2020 as well as the number of persons who may be paid more than 500 euros in pension or pension plus remuneration for work next year.

Without the extraordinary pension rise, an estimated 174,000 pensioners would be liable to income tax next year and for 196,000 pensioners their pension or pension and remuneration for work combined would exceed 6,000 euros a year. 

In 2019, the pension of an estimated 105,600 pensioners, making up 31.5% of all pensioners, is liable to tax. For 137,300 pensioners or 41 percent of all pensioners the pension or pension and remuneration for work taken together are bigger than 6,000 euros.

An extraordinary pension increase by 7 euros a month will take effect on April 1 next year.

The minister also said that as a result of the amendments to the income tax law that took effect at the beginning of 2018, 58 percent of old-age pensioners had to pay less income tax and 7 percent of old-age pensioners more income tax for 2018 in comparison with 2017. The tax burden of the rest of the pensioners did not change. 

In 2018, the pension of 53,000 pensioners, making up 14.9 percent of all pensioners, was subject to taxation with income tax. The pension or pension plus remuneration for work of 99,800 pensioners, making up 27.9 percent of all pensioners, exceeded 6,000 euros in that year.