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  • Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 5/29/2012

Estonia - ECJ case on taxation of cross-border pension payments 

May 29: The European Court of Justice (ECJ) issued a judgment that EU Member States must take an individual’s personal and family circumstances into account, and that an EU Member State of previous employment must consider these factors in situations when it is not possible for the Member State of residence to do this—even if the taxpayers do not receive all, or almost all, of their income from the Member State of previous employment. Commission v Estonia, C-39/10 (10 May 2012).

The case concerns a complaint filed by an Estonian national who had moved to Finland. The individual received 50% of his pension income from Estonia and 50% from Finland, where he was resident. The pension income received from Estonia was subject to income tax in Estonia, whereas the income received in Finland did not give rise to any tax liability due to the very low level of total income earned in Finland. The Estonian pension was so low that it would have been covered by personal allowances if the individual was resident in Estonia. However, the Estonian tax regime only granted basic allowances to non-residents earning the majority of their income, i.e. at least 75%, in Estonia, by allowing them to apply to be treated as Estonian tax residents.


To read a May 2012 report, prepared by the KPMG EU Tax Centre: CJEU decision in Commission v. Estonia (PDF 50 KB)



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