The 2027 Budget Bill (Art. 2) and Social Security Financing Bill (Art. 6), currently under review in the National Assembly, provide for a single cap on severance pay exemptions: 1 PASS, or €48,060 in 2026.

📌 What would change
→ Income tax: The exemption would drop from a maximum of 6 PASS to 1 PASS.
→ Social security contributions: from 2 PASS to 1 PASS.
→ Statutory or contractually agreed compensation, which is currently exempt without limit, would become taxable above 1 PASS.
→ Also affected would be: settlements, damages awarded by a judge, severance pay under the PSE and RCC programs, and corporate officers (whose exemption would be reduced from 3 PASS to 1 PASS).

🎯 Who does this concern?

According to the government, 95% of employees would remain fully exempt. The measure primarily targets senior executives, long-tenured employees, and corporate officers. For example, out of a severance payment of €55,000, €6,940 would become taxable and subject to social security contributions.

⏱️ The real catch: two different schedules

→ Social aspects: The relevant date is the effective date of the termination. Terminations taking effect on or after January 1, 2027, would fall under the new system.

→ Tax aspects: The government’s bill does not provide for any transitional measures and could apply to severance pay received as early as 2026. An amendment adopted in committee preserves the old system for terminations signed or notified before January 1, 2027. It must still be voted on again during the plenary session.

In practice, a mutual termination agreement signed in December but taking effect in January could fall under the old tax system and the new social security system.

🔎 Our advice

Don’t rush, but don’t wait on the sidelines either. For ongoing negotiations involving significant amounts:

• Simulate the cost and take-home pay under both systems;

• confirm and document the dates (signing, notification, effective date);

• factor uncertainty into the negotiations

The parliamentary deliberations in the coming weeks will be decisive. We are closely monitoring the bill.