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I am made redundant and receive a lumpsum payment. What are the tax options?

Unfortunately a lot of people are made redundant. Most of the times you will be able to arrange a redundancy package. The amount mainly depends on the time you worked for the company.

Of course there are tax consequences.

When you get a redundancy package you could choose out of three options:

  1. Payment in one lumpsum to your bankaccount
  2. Income insurance from an insurance company or bank (no longer possible from 1 January 2014)
  3. Income insurance from your own limited company, called Stamrecht BV (no longer possible from 1 January 2014)

As you can see option 2 and option 3 are no longer possible for new redundancies since 1 January 2014. Existing income insurances and stamrecht BV's remain approved. But new ones will be refused.

1. Payment in one lumpsum to your bankaccount

Normally when you are made redundant the employer will pay the redundancy package in one amount. The employer can also decide to pay you in monthly terms combined with a social security payment from the government but we will not discuss this further.

The lumpsum will be normally taxed. So this means that the whole amount will be taxed together with your other income during the year. The higher the income and lumpsum the sooner you will be in the highest tax scale of 52%. When normally your salary isn't taxed against 52% the lumpsum leads to a higher average taxation. It may be possible to use the so called average income ruling ("middelingsregeling") to reduce taxation. This way income is spread out over 3 years and tax is calculated based in the same average income in these years. The tax caluclated this way is compared to the tax you have paid now and the difference is paid back (if this is more than € 545).

Please be advised that you won't get the 30% ruling on the redundancy package.

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Comments (2)
Comment by John Buckley on Tue, Oct 14th, 2014 at 11:41 AM
The income insurance options are no longer possible, according to my financial and tax advisers.
Comment by Arjan Enneman on Wed, Jan 21st, 2015 at 11:26 PM
The income insurance and the stamrecht BV options are indeed no longer possible since 1 January 2014.
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