Severance payments and stamrecht BV.

Broadstreet - News - - Severance payments and stamrecht BV.

August 19th, 2013

The government has announced it is, in search of the € 6 Billion budget cuts, investigating whether the option to defer taxes on a golden handshake should be abolished.

Currently, when a lump sum payment is made in lieu of a termination of an employment contract, the employee has the choice to settle payroll and income taxes upon receipt of the lump sum, or to defer taxes on the lump sum by depositing the cash for a so-called “standing right”; a right to receive annuities in the future.

The advantage is potentially lower income tax rates in the future (the payment is spread out, thus using lower brackets, and no box 3 net asset tax on the after tax lump sum.

The money should then be deposited with a bank (on a special account) or with an insurance company. A third alternative is setting up a “stamrecht B.V.”; an entity that can act as the insurer for the annuity. Often, this B.V. is then also used to finance and run the start-up of a new business.

Plans are to abolish this option. For existing stamrecht B.V., the option will then be introduced to pay out the capital in one go, against an adjusted tax rate.