Reader question: My wife was made redundant last year and got a payment. How should people declare these? J.G.
This first depends on the ‘collective convention’ used by your wife’s employer, and then the exact nature of what one considers to be a ‘redundancy’ payment. A convention is a set of employment laws that apply only to one (or sometimes several) areas of business.
In essence, a redundancy payment in the strict sense (not, for example, compensatory for such things as unpaid holidays), and which is worked out according to the rules in the relevant convention, is tax-free. Also exempt, for example, are payments for being paid off as part of a ‘social plan’ such as a plan de sauvegarde de l’emploi (schemes for businesses in financial difficulty).
If your wife received a higher amount, then the exemption is limited to the higher of: half the amount of the payment, or two times the gross salary of the year prior to redundancy.The convention number should be found on the payslip as a four-digit code. Alternatively, find the firm’s NAF (classification) code which is a four-digit number followed by a letter, then find out which convention relates to it.
Taxable amounts are filled in as ‘salary’ income in the income tax return. If an amount has been pre-filled and is not correct as to the amount that is taxable, you may correct it.
Also taxable are any amounts to compensate for paid holiday entitlement, or the indemnité de préavis given to employees laid off without a notice period, or the indemnité de non-concurrence, relating to promises not to do work in competition with the former employer.
All of these forms of taxable income can, optionally, be declared under the ‘quotient’ system for exceptional one-off amounts, if preferred. The total taxable amount is inserted only in box 0XX (2042C on the paper form).
To understand more about French income tax declarations download our helpguide, Income Tax in France 2022 (for 2021 income). As a digital, downloadable guide, priced €14.90, it was last updated on April 8. Order your copy here