Pension tax exemption rules

These rules provide that pension income derived by an individual on or after 1 January 2022 shall be partially or fully exempt from tax as follows:

• Pensions income derived in year of assessment 2023 (basis year 2022) - amount exempt is 20%. The amount to be exempted is capped at € 2,864.
• Pensions income derived in year of assessment 2024 (basis year 2023) - amount exempt is 40%. The amount to be exempted is capped at € 5,987.
• Pensions income derived in year of assessment 2025 (basis year 2024) - amount exempt is 60%. The capping to the amount to be exempted has been increased to a maximum of € 9,732*.
• Pensions income derived in year of assessment 2026 (basis year 2025) - amount exempt is 80%. The capping to the amount to be exempted has been increased to a maximum of €12,976*.
• Pensions income derived in year of assessment 2027 (basis year 2026) - amount exempt is 100%. The capping to the amount to be exempted has been increased to a maximum of € 16,220*.

*The following increases have been introduced through LN 5 of 2024 and are applicable as from 1 January 2024.

Pension income carries the same definition as the term “pension income” in the Tax Rebate (Pensioners) Rules, thus defined in the Income Tax Act and means any pension, charge, annuity or annual payment, whether local pension or foreign pension.

Do you need any further assistance about the pension tax exemption rule? Contact us, we can assist you.