Tax on transitional allowance
How much tax do you pay on the transitional allowance. What will you keep net? Read it here.
Menu
The amount of tax on the transitional allowance or severance payment depends on the amount of the total gross annual income as well as the gross severance payment. The table below shows the 2023 tax rates.
| Income in 2023 | Tax rate |
|
0 – € 73.071 |
36,93 % |
|
€ 73.071 and more |
49,5 % |
Thus, the transition or severance pay comes on top of the annual income. The employee receives the net compensation at the final settlement. The wage specification of the final settlement can be used to check which tax rate has been applied. If too much or too little tax has been withheld and remitted to the tax authorities, this will show up on the employee's income tax return.
It is possible to make your own calculation of how much tax you have to pay on the severance pay. In this overview, you can see how much tax in total has to be paid to the tax authorities on the annual income + transitievergoeding (or severance pay).
Suppose the income is €50,000 gross and the transition allowance is €25,000 then the total income is €75,000.
| You pay 49.5% tax on (€75,000 - €73,071): | € 1.929 |
| 49,5% tax | = € 955 |
| You pay 39,93% tax on | € 23.071 |
| 36,93% tax | = € 8.520 |
| Total tax | € 9.475 |
The employer will deduct €9,475 in tax from the €25,000 gross transitional allowance and remit it to the Tax Authorities.
There are several options to pay less tax on the transitional allowance or severance pay. You can choose to use (part of) the gross compensation to pay for training or course costs, for example. This ensures that no tax needs to be calculated on that part. The employer pays such costs before the (remaining) severance payment is transferred to the employee: no tax is levied on that part that has already been spent on costs.
How much tax do you pay on the transitional allowance. What will you keep net? Read it here.
What are the consequences for the 30% rule when getting unemployed? You can read more about it in this article.
A company can deduct the cost of outplacement or training from the employee's transitional allowance. You can read how this works here.
Arbeidsjurist Eindhoven is part of Adviesgroep Eindhoven. The one-stop-shop for individuals, freelancers and directors and their companies.
