Severance payments are sometimes made in the event of termination or termination agreements.
They have to be taxed - but there is a trick.
In some cases, when employees leave the company, they receive a
severance payment
.
With a longer period of time in the company, six-figure severance payments can be made, as reported by the
German Press Agency (dpa)
.
And they are fully
subject to wage tax
, explains the Rhineland-Palatinate Chamber of Tax Consultants, according to
dpa
.
Because of the progressive development of the tax rate, a high severance payment can greatly increase the tax burden, as the report says.
Get the best out of tax with severance pay - experts provide tips
But there is a very legal trick: A severance payment can be
taxed
at a
reduced rate
according to the so-called
fifth rule
and
fictitiously distributed over five years
, provided that it is extraordinary income, as
reported by the
dpa
.
According to the report, these exist if the severance payment is paid within a calendar year and the severance payment is higher than the wages that the employee would have received if the employee had continued their employment until the end of the year.
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The report describes the following
calculation example
: A married couple who are assessed together have a
gross wage
of 80,000 euros (40,000 euros per spouse).
After deducting business expenses and pension expenses, the
taxable income is 67,500 euros.
The income tax in the splitting tariff is around 12,700 euros.
If a spouse receives a severance payment of 100,000 euros in the same year, this would increase the tax burden to around 52,400 euros.
However, if the one-fifths rule is applied, the married couple's tax burden is only around EUR 46,700.
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Severance payment: This is how the tax burden can be reduced
Another way to reduce the tax burden is to
pay part of the severance payment into a direct insurance company, a pension fund or a pension fund
.
However, a maximum amount must be observed, the report says: This is four percent of the contribution assessment limit for pension insurance and is multiplied by the number of years (maximum ten) that the employment relationship has existed.
The report gives the following example: Four percent of the income threshold, which in the new federal states will be 7,100 euros in 2021, is 284 euros.
With ten or more years of employment in the same company, 284 euros times 12 (months) times 10 (years) - a total of 34,080 euros - should flow into a direct insurance or pension fund tax-free, writes dpa.
In this way, the
taxable part of the severance payment can be significantly reduced
.
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