The employee’s taxable court costs are not TyEL income

Varma’s Insurance Services have received several enquiries from employers on whether the court costs paid by the employer on behalf of the employee that are considered taxable earnings are also TyEL income on which the employer should pay TyEL contributions.

Some time ago, the Supreme Administrative Court ruled that court costs paid by the employer on behalf of the employee are considered taxable earnings for the employee. In addition, if the employer compensates the employee for the taxes imposed on them on the basis of above-mentioned court costs, these are also taxable earnings for the employee according to the interpretation of the Finnish Tax Administration.

Although the earnings that form the basis of the pension and the TyEL contributions are, as a rule, the same earnings the Tax Administration considers taxable wages under the provisions of the Act on Income Tax, the matter is not as clear-cut as that. When applying the Employees Pensions Act (TyEL), what is decisive is whether the payment in question is compensation for work the employee has done. Only wages or salary or other compensation that has been paid as compensation for work are considered earnings on which pension is based. In this case the court costs are based on the service provided by the lawyer and not on the work of the employee in question. Therefore, the Finnish Centre for Pensions has deemed that court costs and the taxes imposed on the basis of them that the employer has compensated the employee for are not TyEL income.

This interpretation means that the way these payments are handled in taxation and in earnings-related pension insurance differs. Taxable payments are excluded from TyEL income, no TyEL compensation is paid for them and no TyEL pension is accrued on the basis of them.

Työnantajan maksamista oikeudenkäyntikuluista ei kerry työeläkettä

Eläketurvakeskus, Työeläkelakipalvelu, Työntekijän veronalaiset oikeudenkäyntikulut, jotka työnantaja maksaa työntekijän sijasta, eivät ole eläkkeen perusteena olevaa työansiota


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