Social regime (article 8 - Social Security Financing Act) :
Until 2015, the portion of indemnity paid due to the forced termination of the corporate officer , exempted from income tax pursuant to Section 80 duodecies of the FTC, was exempted from social security contributions and "CSG / CRDS" up to the limit of 2 times the annual social security ceiling "PASS" (or EUR 76,080 in 2015), subject to not exceeding 10 times this threshold, i.e. EUR 380,400.
The forced termination indemnity paid to a corporate officer (i.e. the legal person who represents the company to third parties) that exceeded the threshold of 10 times the PASS/annual social security ceiling, i.e. EUR 380,400 were fully (i.e. as of EUR 1) considered as salary for the calculation of social contributions and CSG / CRDS.
In 2016, this threshold is divided by two and therefore lowered to 5 times the "PASS", i.e. EUR 193,080.
Taxation regime (article 3 - Social Security Financing Act) :
Until 2015 (income tax on 2014 revenues), pursuant to the Section 80 duodecies 2 of the FTC, the exemption limits of compensation paid due to the forced termination of the corporate officers quoted in the FTC, Article 80 ter matched those applicable to severance payments paid to employees. Therefore, these payments were exempted from income tax in the highest limit between:
- half the amount of the severance payment received, and
- twice the amount of the gross annual remuneration received by the beneficiary during the year prior the termination of his functions.
The share exempted from income tax could not exceed six times the "PASS", i.e. EUR 225,288 in 2014. As an exception, in case of retirement, the exemption limit was lowered to five times the PASS or EUR 187,740.
Article 3 of the 2016 Finance Act (taxation of income 2015) amends the provisions of the FTC, Article 80 duodecies 2 and replaces the exemption limits of forced termination benefits paid to directors and officers by a single boundary exemption. This new limit equals 3 times the PASS, or:
- EUR 114,120 for payments received in 2015,
- EUR 115,848 for those received in 2016.
In case of combination of an employment contract with a corporate mandate, the case law of the Council of State (EC 30-12-2009 No. 316730), which considers that the exemption limit should apply to the total of the severance payment and the forced termination benefits of the corporate mandate and not individually to each compensation, should not be applicable under the new provisions.
Indeed, there is not one, but two specific exemption limits for either the compensation for severance payments and the one for forced termination indemnity of the corporate officers .
So, in case of combination of termination of the work contract with forced termination of a corporate officer mandate, we should apply to each indemnity received its own ceiling.