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Income Tax - Termination, Termination, Retirement

Verified 01 January 2023 - Directorate for Legal and Administrative Information (Prime Minister)

Income tax: 2023 2022 income tax return

Published on 1 January 2023

This page is updated for the 2022 tax return.

However, forms, online services and information documents are not yet available for the 2023 campaign. They will be posted as soon as they are available.

You received a sum at the end of a contract of employment? It is subject to income tax regardless of its origin (resignation, dismissal, retirement, etc.). However, an exemption is possible in some cases.

The following amounts collected at the end of a contract of employment are still taxable:

  • Allowances breach of employment contract (compensatory allowances for notice, paid leave, non-competition allowance)
  • Allowances termination of contract or mission (end-of-contract allowance precariousness premium paid at the end of a CSD, compensation for early termination of a CSD at the initiative of the employer, termination of acting mission allowance, etc.)

To complete your tax return or verify your pre-completed return, you can review the explanatory note and practical brochure on income tax.

If a pre-filled amount is incorrect, you must correct it.

The Internet income tax return is required if your primary residence is equipped with internet access and you are able to file your return online.

The 2022 income reporting period has ended.

The 2023 return for 2022 income will be in April 2023.

Termination benefits are partially exempt from income tax. In some cases, the exemption is total.

Limited exemption from termination indemnity

The compensation paid in the event of termination (excluding job backup plan) is partially exempt from income tax.

The amount corresponding to the compensation fixed by law or collective agreement is exempt in full.

If you received a higher amount, the exemption is limited to one of the following amounts:

  • 2 times the amount of gross compensation you received in the year before your termination
  • Half of the severance pay you received

Tax services will choose the solution that is most favourable to you.

Warning  

the exemption is limited to a maximum of €246,816 for allowances received in 2022 (€263,952 for allowances paid in 2023).

Example :

An employee shall receive redundancy pay from €120,000 of €70 000 is the compensation provided for in the collective agreement. His gross remuneration for the calendar year preceding the termination is €40,000.

The termination indemnity shall be exempt up to the amount provided for in the collective agreement, either €70 000.

This amount is greater than 50% of the compensation received (€120,000/2 = €60,000) but less than double the annual gross remuneration, equal to €80,000 (€40,000 x 2).

The allowance is therefore exempt up to the sum of €80,000.

The surplus 40 000 (120 000 € - €80,000) is taxable.

The conventional severance pay is exempt under the same conditions, if you are not entitled to a pension from the statutory scheme.

Full termination indemnity waiver

The termination indemnity is tax-free in full if:

  • Compensation received under a social plan (job protection plan called PSE)
  • Compensation and damages awarded by the judge in case of unjustified or irregular dismissal (undue breach, procedure not respected)
  • Special redundancy pay due in the event of a breakdown in the context of an accident at work or an occupational disease
  • Allowance for dismissal on grounds of discrimination
  • Allowances for Collective Agreement Break
  • Compensation paid on termination of contract mobility leave

How to report?

To complete your tax return or verify your pre-completed return, you can review the explanatory note and practical brochure on income tax

If a pre-filled amount is incorrect, you must correct it.

For the taxable portion of the termination benefits, you can apply for the quotient system.

The Internet income tax return is required if your primary residence is equipped with internet access and you are able to file your return online.

The 2022 income reporting period has ended.

The 2023 return for 2022 income will be in April 2023.

Your retirement or pre-retirement allowance is taxable. However, a total or partial exemption is possible in some cases.

Allowance for voluntary retirement or early retirement

The allowance paid in the event of voluntary retirement or early retirement shall be taxable in full.

Employer-initiated retirement compensation

The compensation paid in the event of retirement (excluding job backup plan) is partially exempt from income tax.

The amount corresponding to the compensation fixed by law or collective agreement is exempt in full.

If you received a higher amount, the exemption is limited to one of the following amounts:

  • 2 times the amount of gross compensation you received in the year before your termination
  • Half of the retirement benefit you received

Tax services will choose the solution that is most favourable to you.

Warning  

the exemption is limited to a maximum of €205,680 for retirement benefits received in 2021.

Total Exempt Severance

Retirement or pre-retirement allowances shall be fully exempt in the following cases:

  • Compensation received under a social plan (job backup plan, says PSE
  • Early termination benefit received under the scheme asbestos preretirement
  • Compensation received under the preretirement-termination of the National Employment Fund (FNE) at the time of departure of the company, under the same conditions as the redundancy payment

How to report?

You must report the following amounts:

  • All your voluntary retirement (or pre-retirement) benefits
  • Taxable portion of your retirement benefits

To complete your tax return or verify your pre-completed return, you can review the explanatory note and practical brochure on income tax.

If a pre-filled amount is incorrect, you must correct it.

For the taxable portion of retirement or pre-retirement benefits, you can apply for quotient system.

The Internet income tax return is required if your primary residence is equipped with internet access and you are able to file your return online.

The 2022 income reporting period has ended.

The 2023 return for 2022 income will be in April 2023.

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