When we have to leave our job, whether we are willing or not, we still have to manage our tax burden. This article, thus, will introduce the information and related tax burden for those who are retrenched, terminated, and retired in which the employees are not at fault. This article will provide guidelines on taxation in order for the mentioned employees to manage their taxation as effectively as possible.

First of all, let us take a look at the types of the lump sum that a person would receive when they left their job and the options they have in paying tax.

1. Severance Pay

is the money an employee will receive according to the Labour Protection Act in case that an employee was laid off, fired, their contract has ended, and retired in which the employee is not at fault. The compensation rate according to the Labour Protection Act will be calculated from their length of service with the employer and the rate of the latest salary will be used to calculate the severance pay. This can be concluded as followed:

However, if an employee voluntarily resigned or was fired from serious violation, they will not be entitled to this severance pay. Moreover, job dismissal can be categorised into 2 cases which are:

• · Severance pay received from being laid off or fired From the severance pay received, the first 300 000 baht will be exempted from tax payment. For example, if an employee received a severance payment of 450 000 baht, the first 300 000 baht will be exempted from tax payment and the remaining 150 000 baht will be taken to determine the amount of the personal income tax they have to pay.
  
  
• Severance pay received from retirement or contract termination The severance pay, in this case, will have to be taken wholly to calculate the amount of tax an employee has to pay. There will no exemption for the first 300 000 baht like the case of being laid off or fired.
  

2.Provident Fund

When one has to leave a job regardless of their status, there are 3 options as follow:

• Withdraw as cash Money received from the provident fund will be divided into 4 sections which are:

1. Savings which is the money deducted from monthly salary to save into the provident fund.

2 Benefit of savings.

3  Reserved fund that employer support in provident fund.

4 Benefits of the reserved fund.

By law, if the money is withdrawn from the provident fund when the membership duration less than 5 years and the age of the member is less than 55 years, points 2 – 4 will be taken to determine the amount of tax that has to be paid. For the saving returned, there is no need to pay taxes. The method of tax payment is as followed:

• · Maintain the money in the provident fund If we do not want to withdraw the money out as cash, we can choose to maintain the money in the provident fund and remain as a member of the provident fund in which the employer does not have to support the funding anymore. The duration that the money can be maintained in the provident fund according to the condition of the fund but no less than 90 days from the day one left the job. As long as the money is not withdrawn, we do not have to pay taxes. Besides, if we get a new job and our new employer set up the provident fund, we can transfer the money from the previous company’s provident fund to the new company’s. Our membership duration will then continue seamlessly and the full amount of our money in the provident fund, if we have the membership duration in the provident fund of more than 5 years and have an age of no less than 55 years old, to be exempted from paying taxes.
  
  
• Transfer of provident fund to Retirement Mutual Fund (RMF) Apart from transferring provident fund from previous company to the new company, there is an option of transferring provident fund to RMF. This means that there is no withdrawal of cash from the fund and we do not have to pay taxes for this amount of money at all.

Therefore, if there is no urgent need to use the money and the amount of money will definitely be kept for after retirement use, it is highly recommended, if job resignation is not retirement, to maintain the money in the provident fund to transfer it into the new provident fund (if applicable) or transfer from a provident fund to RMF, so that we do not have to pay taxes for this amount of money.

3. How to pay taxes from a lump sum received when one left a job

• When we stay in a job for 5 years we can choose to include or exclude this amount of money to pay for the personal income tax at the end of the year. If we choose to file separately, we have to use ‘P.N.D.90, 91 to calculate the amount of money paid once for leaving the job without calculating with other personal income tax’ , in which, normally, if this can be separated from other income, the tax burden will be lesser. Thus, we should choose to file tax with P.N.D.90.