Even a small postponement of the payment of a severance package can save cash. Choosing the right time also helps to save taxes without much effort. For example, you can pay your managing director in installments and still save on taxes.
Save taxes now when paying out severance pay
Special tax rules apply to the payment of severance pay.
If the income from wages and severance pay is higher than your previous annual income (so-called. accumulation), a reduced tax rate applies. To determine this, only 1/5 of the compensation amount is taken into account together with the other income.
Reduced tax rate
This avoids that your tax progression increases excessively. The remaining 4/5 of the severance pay is not tax-free. However, you will still be taxed at the calculated reduced tax rate.
The shifting of income can be worthwhile
The severance payment is deemed to have accrued for tax purposes as soon as you are able to dispose of it economically. As a rule, this is the credit to your bank account. This is exactly the point where you can hook in.
If a contractual relationship is terminated at the end of the year, it may make sense to pay out the severance payment only one month later in the following year. The payment then slips into another calendar year and is taxed accordingly later.
This approach is advisable if your income is likely to be lower in the following year. Paying out the severance pay in two installments can also help lower your tax rate and thus reduce your tax burden.
No design abuse
The agreement to pay out the severance pay later is not an abuse of structuring possibilities. Here the tax court of Baden- Wurttemberg clearly gives you support (FG Baden-Wurttemberg of 20.11.2008, Az.: 3 K 101/05). The Lower Saxony Regional Court (FG Niedersachsen) also considers a postponement of the severance payment to be permissible in certain cases (FG Niedersachsen dated 19.02.2009, Az.: 5 K 73/06).
Flexible payments are possible
The timing of the inflow is not objectionable, even if essentially tax reasons are decisive for this. The judges explained that the payment of a severance package does not necessarily have to be made at the time of termination of the employment relationship. Rather, the compensation may be paid before or after this point in time. This applies at least if there is a close temporal connection between the termination of the employment relationship and the time of payment.
It is obvious that these judgments do not please the tax office. Accordingly, the tax authorities have appealed to the Federal Fiscal Court and are now hoping for a different decision from the highest judges.
Attention: Controlling directors
Perhaps there will also be a final decision for sole shareholders and controlling managing directors. Whenever one person alone can determine the time of payment, the tax authorities apply particularly strict standards and like to prematurely assume an abuse of the tax structure.
Severance pay: Here it pays to "push"
If your income is taxed close to the top tax rate of 42% (from 52.152 € for single and 104.304 for married couples per year), paying out a severance payment in the lower-taxed following year pays off. Because: If the compensation is lower than the previous annual gross salary, your tax rate can also be much lower. You are left with significantly more "net.
It is important that you also take into account any other income in your income – such as income from rent or capital assets.
An unmarried manager receives a gross monthly salary of 10.000 €. The top tax rate of 42% applies here.
In the termination agreement, notice of termination is given at 31.12. 2009 and the payment of a severance pay of 40.000 € is agreed. If the managing director is not expected to have any further income in 2010, it is worth paying out in the following year.
payment in 2009:
40.000 € x tax rate 42
= Tax burden: 16.800 €
Payout in 2010:
40.000 € x tax rate 25
= Tax burden: 10.000 €