With circular E.2060/2024 published on September 2024, by the Independent Public Revenue Authority, clarifications are provided regarding the tax treatment of insurance contributions paid to Occupational Insurance Funds of voluntary insurance (Abbreviated as TEAs in Greek) as well as funds of par. 20 of article 6 of Law 3029/2002.
The said circular provides clarifications also regarding the insurance premiums paid in the context of collective pension schemes, as well as the pension benefits paid by the above funds (TEAs) and the pension benefits paid in the context of collective pension schemes, in accordance with the provisions of Law 5078/2023. It is clarified that the new rules apply for contributions paid and for income acquired as of 01.01.2024.
The new provisions of the L.5078/2023 stipulate that voluntary contributions paid to TEAs and premiums paid by both the employee and the employer in the context of collective pension schemes cannot exceed annually and cumulative:
a) the 20% of the gross income for the employees, deriving exclusively from employment
b) the amount of 20,000 euro for non- employees adjusted annually with the consumer price index
With the said circular, the member is recommended to choose with his statement whether he wishes the refund which concerns the excess of the amount to be made by the TEA or the insurance company.
Taxation of benefits in Brief
Pension benefits paid by TEAs as well as benefits paid in the context of collective pension schemes shall be taxed as per the tax rates below, the law includes different tax treatment for Periodic Payments and Lump-Sum Payments:
– For up to 5 insurance years and for periodic payments the tax rate is defined at 10% while for lump-sum payments is defined at 20%
– From more than 5 insurance years and up to 10 years, for periodic payments the tax rate is defined at 7.5 % while for lump-sum payments is defined at 15%
– From more than 10 insurance years and up to 20 years, for periodic payments the tax rate is defined at 5 % while for lump-sum payments is defined at 10%
– For more than 20 insurance years, for periodic payments the tax rate is defined at 2.5% while for lump-sum payments is defined at 5%
The above rates are increased by 50% in case of early redemption by the beneficiary.
For individuals insured after the age of 55, the above rates are increased by 5% for each year below 5 years of insurance. Regarding the increase of the rates in case of early redemption and/or insurance after fifty-five (55) years, is specified that they do not constitute early redemption of an individual account, the payment and advance payment of benefits as long as the conditions for receiving the pension benefit defined in these provisions, are met.
Specifically, payments are not considered as early redemption by the beneficiary in the following cases:
a) In cases of an employee’s dismissal or an employer’s bankruptcy.
b) In cases where the employee participates in a voluntary exit plan.
c) In cases where the employee has either established a pension right or has reached the 6Oth year.
Moreover, the circular includes:
– Clarifications regarding the exemption from the calculation of income from employment and pensions of the contributions and insurance premiums of the employee and the employer for his medical and hospital coverage or for the coverage of the risk of life or incapacity of the employee, up to the amount of one thousand five hundred (1,500 ) euros per year per employee.
– Clarifications regarding the considerations of what is included in the income from employment or not for the scope of the definition of the 20% of the gross income threshold.
– Specific examples for the cases of an early redemption and whether the increased tax rates apply or not.
For more information please do not hesitate to contact our Payroll team at payroll@privelpartners.gr
