Non-taxable part, but also taxation of benefits. Let's look together at the tax side of the "European pension".

The Pan-European Personal Pension Product (PEPP) is a supplementary (voluntary) financial product to any mandatory or employee pension product. Its aim is to accumulate the saver's capital in the long term for the purpose of later providing a certain form of income in retirement, while it is characterized by strictly limited possibilities of early capital withdrawal.

It is a form of retirement savings that is particularly attractive especially for young and mobile people who travel actively. However, it is advisable to know the tax implications of savings in advance.

We assume that the pan-European personal pension product will also play a role in attracting new or retaining existing employees from the point of view of employers in the future. We therefore present a summary of the tax implications for savings as well as for the future payment of benefits.

A pan-European personal pension product from a tax point of view from 2023

In the period of saving for retirement, it will be interesting for savers to use contributions as a non-taxable part of the tax base. The taxpayer (saver) will have, after meeting the defined conditions, the possibility of applying the non-taxable part of the tax base from contributions to a pan-European personal pension product (or to a pan-European personal pension product abroad of the same or comparable type). This non-taxable part will be able to be deducted from the tax base in the amount of demonstrably paid contributions to the pan-European personal pension product and contributions to supplementary pension savings in the given tax period, in total up to 180 Euros per year.

The non-taxable part of the tax base from the contributions to the pan-European personal pension product will therefore not be a separate non-taxable part, but will be assessed together with the contributions to the supplementary pension savings (to the so-called third pillar). Benefits from the pan-European personal pension product will be subject to a similar tax regime as in the case of benefits from supplementary pension savings (the so-called third pillar).

Benefits paid to a saver from a pan-European personal pension product will be considered as income derived from capital assets. At the same time, this income cannot be considered as income exempt from income tax, which means that this type of income will be subject to taxation for the saver. The specific form of taxation for the saver (tax resident in the Slovak Republic) will depend on where the source of this income will be, or in other words, from which country the benefits from the personal pension product will be paid to the saver.

If the source of the income paid to the saver is in the territory of the Slovak Republic, the tax will be collected in the form of withholding tax. In this case, the tax base for withholding tax would be the received performance reduced by the deposits or insurance premiums paid, which means that only the saver's income would ultimately be subject to tax. The financial institution disbursing the income will be responsible for the collection and remittance of the withholding tax. The saver will be paid an already taxed (net) pension.

If the source of income paid to the saver was abroad and would be taxable on the territory of the Slovak Republic in the sense of applicable international treaties and agreements, it would be necessary to tax this income through a tax return - inclusion in the special tax base of the taxpayer (saver) from capital income. Similar to the case of withholding tax, only the saver's income reduced by paid deposits or insurance premiums would be included in the special tax base.