Home » Business » The fifth rule from 2025 – Dipl.-Jur. Jens Usebach LL.M │ Lawyer & Specialist │Dismissal & Labor Law

The fifth rule from 2025 – Dipl.-Jur. Jens Usebach LL.M │ Lawyer & Specialist │Dismissal & Labor Law

die The fifth rule is the regulation in German tax law that applies to taxes on severance payments. It is intended to ensure that… Separation payment The tax burden is less heavy than ordinary income to ease the financial burden on those affected.

One Separation payment it is generally taxablebecause they are extra salary considered. But dank the The fifth rule Taxpayers can benefit from tax savings benefit This applies not only to severance payments, but also to other extraordinary income. However, it will From 2025, this choice will only be possible through the tax return.

With the The government has passed the Growth Opportunities Act, die The fifth rule in the process of withdrawing payroll tax from 2025. That means that Employer tax savings due to the use of the The fifth rule returns cannot be accounted for directly in the income tax. This is supposed to be the Employer relief because the Implementation the The fifth rule often complex and uncertain under the law for them in practice.

For workersthe one Separation payment receiving and continuing to benefit from tax benefits The fifth rule If you want to benefit, this means you have to do something yourself. From 2025 the Separation payment in the full payment month salary charged. You can only do that by submitting a tax return for that year The fifth rule apply retroactively. This means that the tax savings can no longer be used directly during the year, but only afterwards through the tax return.

It is important to remember that the use of the The fifth rule This will automatically lead to the obligation to submit a tax return in the income tax process from 2024. This should be taken into account when planning your personal finances so that you do not lose your -out of potential tax benefits.

In the following case example, a 40-year-old man is single workers affected has a taxable annual income of 40,000 euros in 2024. After being terminated at the end of the year, he will receive one in December 2024 Separation payment in 20,000 euros. The workers According to the income tax calculator of the Ministry of Finance, this would not be taken into account The fifth rule paid income tax of 7,495 euros on his annual income.

By implementing the The fifth rule to be a fifth of the Separation paymentie 4000 euros, added to his annual income. This results in an annual income of 44,000 euros and an income tax of 8,816 euros. The difference between income tax with and without Separation payment It is 1321 euros, which is then multiplied by five to get the income tax on the Separation payment to confirm. Overall, it should workers Therefore pay an income tax of 14,100 euros.

That’s it Rule of five he had to workers However, he has to pay more income tax because his total annual income is 60,000 euros – ie his regular income and that Separation payment – it would be fully taxed. In this example, that would be 14,680 euros in income tax, ie 580 euros more than the tax would be applied. The fifth rule.

It becomes clear that the Rule of five in this case leading to a saving of 580 euros in income tax. However, it is important to note that this tax benefit can only be claimed retroactively by filing a tax return from 2025. It is recommended to submit a tax return because in most cases this leads to tax savings. Exactly workersthe one Separation payment which they specifically benefited from tax returns.

2024-10-17 20:52:00
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