23.06.08

Severance paid to a resigning employee can be tax deductible. Letter # 03-03-06/1/305 issued by the Ministry of Finance (MinFin) on May 13, 2008 explains that, for tax purposes, it doesn't matter whether the employee resigned or was laid-off due to staff reduction or a company’s liquidation. The severance must be listed, however, in the labor or collective contract, as stated by article 178 of the Labor Code of the RF.

The Ministry referred to article 255 of the Tax Code to explain that labor expenses include any premiums, compensations and benefits allowed for by labor or collective contracts.

However, it is important to remember that, according to Paragraph 3 of Article 236 of the Tax Code, if compensation expenses are deducted, they become subject to Unified Social Tax.

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Source: «Главбух»