Genuine severance pay cannot be included in value credits

Because a genuine severance payment is not a wage subject to social security contributions, it cannot be included in a value credit and is therefore subject to wage tax.

A genuine severance payment for the loss of a job cannot be used to top up a working time account, according to the Berlin-Brandenburg Tax Court. Although the severance payment is income subject to wage tax that accrued upon termination of the employment relationship, the severance payment is not income subject to social security contributions. However, the severance payment is not remuneration subject to social security contributions, which means that an agreement on the allocation of the severance payment to a value account is invalid due to the absence of a basis for the agreement, as a genuine severance payment is not eligible for a value account. The plaintiff employer has appealed against the ruling.