How much tax do you pay on a transition payment?
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Detailed explanation, checklist and sources
A severance payment counts as income in the year of payment. Your employer withholds payroll tax, but the final tax depends on your total annual income and personal situation.
General information about Dutch law · Review date not recorded · How we work
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Gross is not net
The agreed transition payment or severance payment is usually a gross amount. The employer withholds wage tax and social insurance contributions according to the rules for special remuneration.
Final settlement through your tax return
In your tax return, the payment is included in your total income. As a result, you may still have to pay tax or receive a refund.
Check the effect on benefits and assets
The payment may increase your income used for benefit assessments and thereby affect allowances. If the amount is still in your account on 1 January, it may also count as assets.
Your checklist
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Gross amount and date of payment
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- Gross amount and date of payment
- Estimated total income in the payment year
- Payroll tax withheld in the final settlement
- Current healthcare, rent or childcare allowance
- Assets on 1 January of the following year
Frequently asked questions
Is the special rate my final tax rate?
No. The withholding by your employer is an advance payment. The final calculation follows through your income tax return.
Can I still average my income?
The income averaging scheme has ended. According to the Tax Administration, the last possible period is 2022, 2023 and 2024.