Resc ss on contracts and ncome tax
Concern ng the employees w th a bus ness relat on term nated through a mutual resc ss on contract, some hes tat ons ex st whether the amounts pa d by the r employer s subject to ncome tax or not.
The rul ngs released by the Revenue Adm n strat on cons der the port on of them up to severance pay as exempt from ncome tax and nd cate that the exceed ng amount should be taxed as earn ngs.
In the latest court verd cts regard ng th s matter, op n ons ex st po nt ng out that these payments cannot be spec f ed as earn ngs s nce they cover the per od follow ng the term nat on of employee-employer contact and w th n that context, the whole amount should not be subject to ncome tax.
The Law Requ r ng Amendments to Tax Laws and Certa n Laws and Statutory Decrees no.7103, publ shed n the 2. Repet t ve Off c al Gazette dated 27 March 2018, attempts to remove these uncerta nt es and el m nate controvers es n terms of payments to employees follow ng the term nat on of the bus ness contract under var ous names (as job loss, term nat on compensat on and ndemn ty of mutual resc ss on contract) and clar fy how ncome tax exempt on should be appl ed.
The amendments to art cles 25 and 61 of the Income Tax Law, state that these payments are cons dered earn ngs. Add t onally, the payments w ll be cons dered together w th severance amounts pa d, f any, and the port on rema n ng w th n the ndemn tylmt should be exempted wh le the rest w ll be subject to ncome tax.