When can I withdraw, when does the 1/5 rule apply?
August 15, 2011 | 20,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
Dear Mr. Tax Advisor,
I have been on sick leave since November of last year and have been receiving sickness benefits until August. Now I want to resign from the company (where I was permanently employed) through a termination agreement because they do not have a suitable position for me. They are offering me a severance payment of 24,000 euros including 3 months of paid leave (starting in August). Will I have a tax disadvantage here, or should I try to have the severance payment paid out to me in January 2012 (as my friends advise) due to the 1/5 rule? What do you recommend?
Thank you for your response.
Dear client,
Thank you for your inquiry, which I would like to answer based on the information provided and in the context of your situation in an initial consultation as follows:
The tax reduction of the 1/5 rule only applies when there is a concentration of income. This is the case when the severance payment exceeds the lost earnings. This cannot be assessed from a distance.
Overall, a payout of the severance payment in 2012 alone may be advantageous, as there is no sick pay in 2012. Although sick pay is tax-free, it increases the tax rate on income under the progression clause. Therefore, the tax burden on the payout of the severance payment in 2011 may be higher compared to a payout in 2012, especially as you will also receive 3 months' salary in 2011.
I must inform you that a binding statement can only be made based on precise numbers, so I recommend that you calculate the tax burden before signing the termination agreement.
I hope I could be of assistance.
Best regards,
Ulrich Stiller
Tax consultant/Diploma in Business Administration
