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620 EUR tax exemption for severance pay and remuneration paid during the notice period
In a Circular of 13 March 2012, the tax authorities specify the employer's obligations under the new regime of partial exemption for severance pay and remuneration paid during the notice period.
Since the 1er January 2012, severance pay and remuneration paid during the notice period benefit, under certain conditions, from a partial tax exemption, up to an amount of 620 EUR (indexed amount for 2012). This exemption is applicable for dismissals notified as from this date (cf. our newsflash of 28 June 2011).
A Circular of 13 March 2012 gives various explanations about the application of this new measure.
The Circular specifies that the employer does not have to withhold tax on the exempted part of the severance pay or of the remuneration, if tax exemption conditions are met. Only the taxable part of the income has to be mentioned in the withholding tax return.
The tax forms 281.10 and 281.20 will be adapted, as from assessment year 2013 (income 2012), in order to separately report the exempted part of the severance pay and remunerations.
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