Severance pay and progression clause
July 19, 2017 | 40,00 EUR | answered by StB Patrick Färber
Good day,
Issue:
In 2016: completely unemployed, received 17,500 euros in unemployment benefits, received a severance payment of 10,000 euros; Tax office now demands a payment of almost 1,100 euros.
Is this legal? If we deduct work-related expenses of 1,000 euros and special expenses of 900 euros from the severance payment of 10,000 euros, the taxable income would be 8,100 euros. According to the basic tax table, this amount should be tax-free, right? Would it have made sense to, for example, take on a job or pay 200 euros in taxes on capital income in order to reduce the difference amount using the fifth provision rule? Thank you very much!
Dear inquirer,
In the title of the question, you already mentioned the correct keyword "Progressionsvorbehalt".
The additional payment here probably has nothing to do with a fifth rule (cannot be checked without further information), but very likely with the fact that unemployment benefits are subject to the progression clause.
Your tax calculation is correct up to an income of EUR 8,100. Now, the tax rate is not applied to EUR 8,100, but rather the one according to the table, which results in an income of EUR 8,100 + 17,500 = EUR 25,600. This percentage is then applied to the EUR 8,100.
You would not have had any possibility to change this, except for not having any additional income other than unemployment benefits in 2016. Every euro of income - even below the basic tax-free allowance - would have been "infected" by the unemployment benefits.
I hope I could solve the mystery.
Best regards,
Tax Advisor P. Färber
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