The pension and disability insurance bill, which was passed unanimously in parliament on 4 December, will raise the retirement age for both men and women to 65 years or 40 years of service or 40 years of pensionable service under the condition that the person is at least 60 years old. Under the previous law, women were eligible for full pension at the age of 63 or with 38 years of pensionable service at the age of 58 years, while men were eligible for full pension at the age of 65 or with 40 years of pensionable service at the age of 58.

The stricter retirement conditions are expected to bring the state pension purse, whose expenditure stood at around EUR 5bn in 2011, around EUR 150m in savings in the first year of implementation, with the number expected to increase after the transitional period passes. For retirement on the basis of years of service, the transition period of the reform will be in effect until 2017 and until 2018 for full age retirement.

The reform also extends the basis for pension calculations from 15 best-paid years of service to 24 best-paid years. Men will be eligible for 57% of average pay during that period and women for 60%. The reform also introduces incentives for people to continue working after meeting the retirement criteria. A bonus of up to 12% will be earned by those who stay on the job for up to three years after meeting retirement conditions.

The government-sponsored changes also introduce the new, fourth income tax bracket, which represents a 9 percentage point tax bump on the previous top bracket. The change, which is slated to be in force only for the next two years, is part of a package of measures to raise tax revenues in an effort to bring the budget deficit to below 3% of GDP.

The changes also slightly reconfigure the brackets, with the third tax bracket now applying for annual pay in excess of EUR 18,960. In another tweak to income tax, a special tax break for student work has been reduced by around 25% to EUR 2,477.

Moreover, sole proprietors with income below EUR 50,000 have also been given the option of foregoing accounting for accepting standardised expenses amounting to 70% of their revenues.

In a change brought on by the austerity bill, the tax rate for capital gains will meanwhile be raised to 25% from 20%, while pay-as-you-go taxation on capital gains will also be expanded to earnings from renting out of real estate.

The tax on rent of real estate has been set at 25% and will no longer be included in income tax, while standardised expenses have been lowered from 40% to 10%.

In another change for property owners brought by the budget implementation act for the coming two years, a 0.5% luxury property tax will now be in force for those with real estate worth at least EUR 500,000, which is half of the previous tax threshold.