Application of the fifth rule in Paragraph 34 (1) of the Income Tax Act
58 years: The company pension agreed upon in the employment contract for retirement at age 65 was terminated by a company agreement (duration 7 years).
At that time, the employer took out a life insurance policy in my favor for the amount of the then vested benefits. The payout was agreed upon upon reaching the age of 65.
62 years: Redundancy by the employer after 30 years of service
63-64 years: 2 years of unemployment
In the first year of unemployment, a severance payment was made, which was taxed using the fifth rule.
64 years: Early application for old-age pension
65 years: In the fourth year after the redundancy, the life insurance payout of the company pension entitlement came to an end of its 7-year term.
The tax office no longer wants to apply the fifth rule to this payment, stating that it can only be applied once.
Since the second payment also meets the criteria of 'extraordinary income' according to § 34 (1) No. 4 EStG, in my opinion, the fifth rule should be applied again, especially since it is related to the same employment relationship.
Questions:
1. Is the one-time compensation for a company pension entitlement treated like a severance payment?
2. Can the fifth rule really only be applied once if all severance payments are made at once? Is therefore a contractually bound temporal stretching of partial amounts detrimental for tax purposes?
