Taxation of public pensions was radically changed in 2005

The taxable portion varied depending
on the age of the recipient at the time of the first pension pay-
ment (e. G. 27% for persons retiring at age 65). Starting in 2005,
the taxable portion of the pension depends solely on the calen-
dar year in which the first payment occurs; the benefciary’s age
is irrelevant.

Under the new regime, full taxability of pension pay-
ments is phased in over a transition period that begins in 2005
and ends in 2040. For pensions first drawn in the years 2005 et
seqq., a tax-exempt amount is determined by applying a percent-
age – the so-called exemption quota – to the monthly pension
in the initial year. The amount so determined remains fxed for
the duration of the pension; hence subsequent increases in the
pension amount do not alter the amount of the exemption.

For pensions commencing in 2005, the exemption quota is 50%.
For pensions commencing in subsequent years, the exemption
quota decreases in steps of 2% annually through 2020, then 1%
from 2021 to 2040, so that pensions commencing in 2040 or
thereafter are fully taxable.