Termination agreement
November 29, 2010 | 60,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
If I sign a termination agreement for 31.12.2010 (last salary in December 2010) and receive a severance payment, is it possible for the severance payment to be paid out in January 2011 and still fall under the 1/5 rule? (In 2011, no income from the company can be taken into account, settlement only with the tax return in 2012), or in the case of a termination agreement for 31.1.2011 (last salary in January 2011), will the company calculate from a tax perspective only the January salary or will this be extrapolated for the entire year 2011? Example: Salary 4,000, - Euro plus severance or Salary 48,000, - Euro plus severance.
Dear Adviser,
Thank you for your inquiry, which I would like to answer based on your information and in the context of your commitment in a preliminary consultation as follows:
It is possible that the severance payment will only be paid out in 2011 and that the five-fifths rule will apply.
The prerequisite for the application of the five-fifths rule is that the severance payment is received in ONE year and that you receive more through the severance payment for the termination of the employment relationship than you would have received with the continuation of the employment relationship. The severance payment paid on the occasion of leaving the employment relationship must therefore exceed the income you would have received from the employment relationship until 31.12.2011.
Example: Forgone annual salary 2011 12x 4,000 euros = 48,000 euros. The severance payment is 60,000 euros, five-fifths rule applicable. If the severance payment is less than 48,000 euros, then the five-fifths rule does not apply. As mentioned, if the termination is contractually set for December 31, 2010, but the severance payment is only made in 2011, then the five-fifths rule applies under the conditions mentioned.
The additional salary of 4,000 euros will be settled according to the monthly table.
I can only advise you to consult a tax advisor in detail BEFORE signing the severance agreement and BEFORE its payment. This forum cannot take on this role.
I hope my explanations have been helpful to you.
Best regards,
Ulrich Stiller
Tax advisor/Dipl. Business Economist
