Can I receive my severance payment tax-free as a non-cash benefit?
April 17, 2023 | 40,00 EUR | answered by Fanni Siebert
Dear tax advisor,
my name is Jenny Schönecker and I have been working in a company for 10 years that is now planning restructuring and offering me a severance package. As I have been researching the topic of severance packages intensively, I am wondering if it is possible to receive the severance package tax-free as a non-monetary benefit.
Currently, I am considering how to best utilize the severance package to minimize the amount of taxes I would have to pay. I have heard that it may be possible to receive the severance package as a non-monetary benefit in order to save on taxes. However, I am not sure how this works and if it is even possible in my case, so I am reaching out to you to learn more about it.
My concerns are that I am not sure how much taxes would be due on the severance package if I were to receive it as a cash amount. I would like to find a solution to save on taxes and make the most of the severance package. Therefore, I am wondering if it is possible to receive the severance package as a non-monetary benefit and how I can best implement this.
Could you please explain to me if it is possible to receive the severance package tax-free as a non-monetary benefit and what steps I need to take for this? I would greatly appreciate your support and expertise on this matter.
Thank you in advance.
Sincerely,
Jenny Schönecker
Dear Mrs. Schönecker,
Thank you for your inquiry regarding the possibility of receiving a tax-free severance payment as a non-cash benefit. I am happy to provide you with detailed information on this matter.
In principle, it is possible to receive a severance payment in the form of non-cash benefits to save on taxes. In this case, the severance payment is not paid out as a cash amount, but for example in the form of securities, goods, or services. These non-cash benefits can be tax-free under certain conditions.
In order to receive a severance payment tax-free as a non-cash benefit, various criteria must be met. Firstly, the severance payment must be paid due to termination of the employment relationship. Furthermore, the severance payment must be in a reasonable proportion to the length of service with the company. Additionally, the non-cash benefits must directly benefit the employee and not be convertible into cash.
To receive the severance payment tax-free as a non-cash benefit, it is important to adhere to these criteria. Therefore, it is advisable to seek advice from an experienced tax advisor before negotiating with the employer and signing a corresponding agreement. They can assess whether the conditions for a tax-free non-cash benefit are met and assist you in implementing it.
However, it is important to note that even with a severance payment in the form of non-cash benefits, taxes may still apply. It is crucial to consider the tax regulations and exemptions. A tax advisor can provide you with individual advice and help you make the most of the severance payment while saving on taxes.
I hope this information is helpful and I am available for any further questions.
Sincerely,
Fanni Siebert, Tax Advisor
