Category Taxes on Severance Pay

Severance Pay, Taxes on Severance Pay

The One-Fifth Rule in Germany: How to Reduce Taxes on Severance Pay

Receiving severance pay in Germany (Abfindung) after losing your job can provide a vital financial cushion. But without proper tax planning, you might lose a substantial portion of your payout to the tax office. Fortunately, the German tax code offers…

Timo
17. April 2025

Taxes on Severance Pay

Income Tax on Severance Pay in Germany: What You Need to Know

Severance pay (Abfindung) can be a financial lifeline when your employment ends—whether due to layoffs, mutual termination agreements, or court settlements. But many employees are surprised to learn that severance payments are subject to income tax in Germany. Understanding how…

Timo
17. April 2025