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Is tax withheld from the severance pay paid to an employee who is laid off due to redundancy?
Is tax withheld from the severance pay paid to an employee who is laid off due to redundancy?
After working for 25 years, I was laid off due to redundancy. My employer informed me that I would receive a certain one-time payment. I would like to know whether any tax is withheld from these payments.
According to the State Tax Service under the Ministry of Economy, when the number of employees or staff positions is reduced, before terminating the employment contract under subparagraph “b” of Article 70 of the Labour Code, the employee must be officially notified by the employer within the following periods depending on their length of service:
- Up to 1 year of service — at least two calendar weeks;
- From 1 to 5 years — at least four calendar weeks;
- From 5 to 10 years — at least six calendar weeks;
- More than 10 years — at least nine calendar weeks.
When an employment contract is terminated under subparagraphs “a” and “b” of Article 70 of the Labour Code, the employee is entitled to severance pay depending on their length of service in the following amounts:
- Up to 1 year of service — in the amount of the average monthly salary;
- From 1 to 5 years — at least 1.4 times the average monthly salary;
- From 5 to 10 years — at least 1.7 times the average monthly salary;
- More than 10 years — at least two times the average monthly salary.
Additionally, pursuant to Article 102.1.14 of the Tax Code, except for temporary disability benefits, state benefits, gratuitous state transfers, state pensions, state scholarships, guarantees paid to employees upon termination of employment due to staff reduction in accordance with the Labour Code, as well as one-time individual payments or financial assistance funded from the state budget based on the legislation of the Republic of Azerbaijan, are exempt from personal income tax.
After working for 25 years, I was laid off due to redundancy. My employer informed me that I would receive a certain one-time payment. I would like to know whether any tax is withheld from these payments.
According to the State Tax Service under the Ministry of Economy, when the number of employees or staff positions is reduced, before terminating the employment contract under subparagraph “b” of Article 70 of the Labour Code, the employee must be officially notified by the employer within the following periods depending on their length of service:
- Up to 1 year of service — at least two calendar weeks;
- From 1 to 5 years — at least four calendar weeks;
- From 5 to 10 years — at least six calendar weeks;
- More than 10 years — at least nine calendar weeks.
When an employment contract is terminated under subparagraphs “a” and “b” of Article 70 of the Labour Code, the employee is entitled to severance pay depending on their length of service in the following amounts:
- Up to 1 year of service — in the amount of the average monthly salary;
- From 1 to 5 years — at least 1.4 times the average monthly salary;
- From 5 to 10 years — at least 1.7 times the average monthly salary;
- More than 10 years — at least two times the average monthly salary.
Additionally, pursuant to Article 102.1.14 of the Tax Code, except for temporary disability benefits, state benefits, gratuitous state transfers, state pensions, state scholarships, guarantees paid to employees upon termination of employment due to staff reduction in accordance with the Labour Code, as well as one-time individual payments or financial assistance funded from the state budget based on the legislation of the Republic of Azerbaijan, are exempt from personal income tax.