ELIMINATION OF DOUBLE TAXATION

According to the tax treaty between Spain and Finland, the main method used to eliminate double taxation is the credit method.

In the credit method, Finland taxes the tax paid in Spain on the same income, but deducts or credits the tax paid abroad from the Finnish tax. This is a so-called reverse credit method, where double taxation is eliminated by the source country of the income instead of the income earner’s country of residence.

TAX PROGRESSION

If the income of a person resident in Spain is exempt from tax in Spain under a tax treaty, Spain may take the exempted income into account when determining the amount of tax to be paid on the person’s other income. In practice, this means, for example, that if a person resident in Spain receives pension income from a Finnish public entity, this income will be taxed in Finland, but Spain will calculate the tax rate taking into account also the pension income from the public entity received from Finland, thereby increasing the tax progression.