Pay out the severance payment in 2010 or in the following year after the termination.
June 21, 2010 | 30,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
Dear tax advisor,
My company has offered me a termination agreement effective December 31, 2010.
The existing employment relationship will be terminated by the employer for operational reasons, while observing the ordinary notice period.
As a social compensation for the loss of employment according to §§9, 10 KSchG, I would receive a severance payment of 68,500 euros.
My annual salary (2009) amounts to 60,700 euros (which will not increase in 2010).
The severance payment would be included in the subsequent regular payroll calculation, so it would be paid on January 10, 2011 along with the payroll for December 2010.
I am not expected to receive any salary in 2011, possibly just unemployment benefits.
Now, my questions to you:
1. Do I need to pay taxes on the severance payment for the year 2010 (in addition to the gross annual salary of 60,700 euros), or only in the year of payment, i.e. 2011?
2. If I have to pay taxes on the severance payment in 2011, can my employer still apply the 1/5 rule?
3. How much tax can I expect to pay on the severance payment?
4. In general, what is more tax advantageous for me: receiving the severance payment in 2010 or in the year after termination, i.e. 2011?
I would greatly appreciate your answers to my questions.
Kind regards,
Dear Client,
Thank you for your inquiry, which I would like to answer based on your information and in the context of your use in an initial consultation as follows:
Question 1
The severance payment is to be taxed in the year in which it is received. If the severance payment is received in 2011, it will also be taxed in 2011.
Question 2
A prerequisite for the application of the five-fifths rule is that the severance payment is received in ONE calendar year and leads to a concentration of income. A concentration of income exists when the severance payment is higher than the income received. This is likely to be the case in your situation, so even if received in 2011, the five-fifths rule applies.
Question 3
The amount of tax depends on whether you are taxed according to the basic or splitting table. In addition, the amount of unemployment benefits must be taken into account, which is tax-free but must be considered under the progression clause. A detailed calculation is only possible based on precise figures and the knowledge of whether the basic or splitting table applies.
Question 4
In principle, my answer to question 3 applies here.
Before the payment is made, you must calculate the tax amount by submitting the necessary documents.
Best regards,
Ulrich Stiller
Tax consultant/Dipl. Business Economist
