Publication

As Latvia joined EU in 2004, it gave a lot of opportunities to travel and work in EU and EEA countries which Latvians exploit a lot.
Many Latvians moved to work outside Latvia with their families. Although many Latvian do consider other EU/EEA (“Europe”) countries as their home countries, some believe to return to Latvia to spend their old age in motherland.

A practical matter to consider when returning after long separation from Latvia is what happens to social benefits (e.g., maternity benefits and old-age pension). The EU Regulation 883/2004 (before Regulation 1408/71) states that free movement of manpower is the priority of Europe. It also leads to the united social security principles to citizens of Europe as the Regulation is applicable in any EU/EEA country directly.

That means that general principles established in Regulation are applicable in all European countries.

Although the Regulation is applicable to all the social benefits (such as sickness benefits, maternity benefits and equivalent paternity benefits, compensations for accidents in the working place and occupational diseases, unemployment benefits, retirement pension (service pension), etc.), this article describes in more details the practical issues with retirement pension.
Despite united regulation on social benefits within EU/EEA countries, each country remains the right to grant the retirement pension as per national laws. This means that if in Latvia retirement pension is granted to individuals older than 63 years and 3 months (in 2018), the pension will be granted to individuals who only reached that age, even if in United Kingdom the retirement pension is granted at age 65 or 62 for Malta.

Where Regulation can help is with the required insurance period. In Latvia, for example, individual must have at least 15 years of insurance period to be able to request retirement pension. Thus, if returning to Latvia at 63 years and not having enough insurance period, the insurance period in, for example, Sweden could be used to be eligible to retirement pension in Latvia. Please, however, note that only insurance period of other EU/EEA countries counts. The social security contributions made in each country remains in that country. That means that individual must request retirement pension from each country as per insurance contributions made in each of them.

The positive thing, however, is that individual can request retirement pension only in one country – from country of his or her current residency. The fact that he or she has worked in any other EU/EEA country should be mentioned in application. Thus, the state authorities would have to get in touch with all the other countries and arrange the retirement pension data to be in one country.

Although it could be convenient to request retirement pension from one institution and wait while they exchange information, from experience it could take up to even 3 years to receive full information between the authorities. While no full information is received, individual receives advance payments considering only available information. Once full information from all the institution is received, the recalculation of previous advance payments is made, and individual receives outstanding amount.

Similar principles of pension contributions and insurance periods are specified in cooperation agreements regarding social security between Latvia and Russian Federation, Australia, Estonia, Lithuania, Ukraine, Canada and Belorussia.

Personal income tax when receiving retirement pension should also be considered. The majority tax conventions for avoidance of double taxation (OECD model conventions) provides that pension is taxable in individuals tax residency country. That means that the tax rules of Latvia are dominating when receiving pension from abroad. The law “On personal income tax” provides that pension is taxable in Latvia with progressive tax rate (from 20% to 23%) reducing by annual non-taxable minimum in amount of EUR 3 600.
Other income -such as, for example, maternity benefits or unemployment benefits are taxed differently and should be investigated separately.

In summary: Regulation No 883/2004 does not change the basic principles established by the Regulation No 1408/71.

Old-age pension is granted to the person, who has reached the age of retirement and his pension rights arise considering the insurance periods in Latvia only or if it is necessary considering the insurance periods in another Member State. The pension is calculated, considering the accumulated pension capital in Latvia.

The retirement age in the EU / EEA Member States is different, that way it is possible that the pension may be granted in one Member State earlier than other.

Similar principles to retirement pension are available also with other non-EU countries with which Latvia has signed the cooperation agreements.
In most cases the personal income tax is payable in Latvia for social benefits received from abroad.