The termination of an employment relationship is a difficult step for an employee. In addition to the employment law-related specifics that must be considered in the termination agreement, there are a variety of tax pitfalls that must be taken into account here, making it necessary to have the termination agreement reviewed from a tax perspective.
Only in this way is it ensured that the employee has the opportunity to tax the severance pay in accordance with the so-called „1/5 rule“, which is fiscally attractive.
Therefore, for our clients, we not only examine the contractual arrangements of the termination agreement for their tax implications, but also advise on whether there are any possibilities to reduce the income tax due on the severance pay. By choosing the optimal exit date from the company, paying out retirement benefits and donations by the employee, significant tax reductions can be achieved in some cases. If necessary, we also advise our clients on whether it is fiscally advantageous to have part of the severance pay directly deposited by the employer into the pension insurance or occupational retirement scheme in order to obtain a tax reduction. Often, in connection with the severance pay, the question also arises whether the employee can take a leave of absence after receiving the severance pay and what tax consequences this may have for the taxation of the severance pay.
As tax advisors, we advise our clients on all tax-related matters, identify existing tax risks, and suggest solutions to avoid tax risks.
