Updates to the tax exemption applicable on pension income derived by an individual and to the maximum tax rebates on pensions which may be availed of.
Legal Notice 5 of 2024, published on 12 January 2024, updates the maximum amount of pension income which may be exempt as from year of assessment 2025 onwards as indicated in the Pensions (Tax Exemption) Rules, originally introduced in 2022.
The updated amounts are applicable on pension income derived on, or after 1 January 2024, by an individual, who is at least sixty-one (61) years old in the year in which the pension income is received and the pension income, were it not for these exemptions, is taxable in terms of Article 4(1)(d) of the Income Tax Act (the ITA). The amounts are as follows:
|
Applicability of the exemption |
Amount exempt |
|
Pension income derived in the year immediately preceding the year of assessment 2023 |
Twenty per cent (20%), but not exceeding two thousand, eight hundred and sixty-four euro (€2,864) |
|
Pension income derived in the year immediately preceding the year of assessment 2024 |
Forty per cent (40%), but not exceeding five thousand, nine hundred and eighty-seven euro (€5,987) |
|
Pension income derived in the year immediately preceding the year of assessment 2025 |
Sixty per cent (60%), but not exceeding nine thousand, seven hundred and thirty-two euro (€9,732) |
|
Pension income derived in the year immediately preceding the year of assessment 2026 |
Eighty per cent (80%), but not exceeding twelve thousand, nine hundred and seventy-six euro (€12,976) |
|
Pension income derived in the year immediately preceding the year of assessment 2027 and in subsequent years |
One hundred per cent (100%), but not exceeding sixteen thousand, two hundred and twenty euro (€16,220) |
The Tax Rebate (Pensioners) Rules have also been amended through Legal Notice 6 of 2024. These are applicable to individuals who satisfy the same condition with respect to age as that which must be met for the exemption, and are also in receipt of a pension chargeable to tax under Article 4(1)(d) of the ITA. Through this change, the maximum tax rebates allowed to be set-off against the tax on the chargeable income is as per below, as from 1 January 2024:
|
Tax Rates used to assess the amount of tax due |
Maximum amount of Tax Rebate |
|
An individual who is chargeable to tax at the single tax rates (i.e. Article 56(1)(b) of the ITA) |
€1,068 |
|
An individual who is chargeable to tax at the parent tax rates (i.e. Second proviso to Article 56(1)(b) of the ITA) |
€858 |
|
An individual who is chargeable to tax at the married tax rates (i.e. Article 56(1)(a) of the ITA) Further tax rebate |
€528 €540 |
No changes were made to the actual calculation of the tax rebates, as applicable according to each tax status.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.