It can be interesting to give the company to your children. You remove a financing problem from the child. In addition, there are many tax facilities especially for family businesses. Here are five tips.
For tax purposes, gifting is the same as selling. You discontinue the business for tax purposes and you must settle the silent reserves and goodwill. This would immediately lead to a liquidity problem. Logically, the beneficiary has to deal with gift tax. VAT can also play a role in the transfer of the business. If you have your own business premises, transfer tax must be taken into account. In short: which taxes do you and your successor (s) has to deal with? And which facilities can you use? If you have the Mastercard Gift Card Balance then there are options that you can go for.
When donating you must determine the value of the company. The strike profit consists of the actual value minus the book value of your company. You can transfer the tax claim on the strike profit to your child. A condition is that the child must have been involved with the company for 36 months prior to the donation. This can be done through employment or as a co-entrepreneur in, for example, a general partnership.
If your child joins the general partnership and you do not record anything, then part of your company may be subject to tax cessation. To strike means to pay.
When donating the company, you transfer entrepreneurial power to the next generation. This involves a gift tax.
The Inheritance Tax Act gives a generous exemption of 100% up to € 1,000,000. In addition, an exemption of 83% applies. Therefore, above € 1,000,000, 17% of the value is taxed for gift tax. Without this facility, a maximum of 20% (child rate) would have to pay inheritance tax on business assets. With this facility, the tax burden (above a value of € 1,000,000) falls to 3.4%.
This exemption is conditional. The beneficiary must continue the business for a minimum of five years. Only then is the exemption definitive.
Should gift tax eventually have to be paid, you can request (interest-bearing) deferment of payment for a period of ten years.
If you have your own business premises, the beneficiary can make use of an exemption from the transfer tax. The business with the building must then continue.
The exemption also applies if you continue the business from a sole trader with one of your children in the form of a general partnership.
When transferring a company as a whole, there is an exemption for VAT.
Tax barriers are removed by the many facilities. It can, therefore, be interesting to donate your company. But beware, a business succession within the family remains complicated. Therefore let your MTH adviser advise you.
Want to play for Santa Claus or Santa Claus just before the end of the year? This way you can give your children smartly and nothing goes to the tax authorities.
Keep an eye on the exemption
If the amount to be donated falls under the so-called donation exemption (this year a maximum of € 5,363 for children, € 2,147 for others, then the recipients do not pay tax on the donated amount.