Uncertainty prevails among entrepreneurs regarding the continued existence of the Business Succession Regulation (BOR). There is increasing talk from politicians in Den Haag about curtailing the tax exemption for a business transfer via gift or inheritance.
These concern curtailments within both the gift and inheritance tax and the carry forward arrangement in income tax. It logically makes (family) businesses think, currently resulting in an increasing number of business transfers. But, don't do anything rash.
Business succession regulation (BOR)
The BOR is a tax facility in the Netherlands that makes it easier to transfer a (family) business to a successor. In gift and inheritance tax, the BOR provides, under specific conditions, a mostly partial tax exemption for business succession.
This regulation is designed to ensure the continuity of family businesses by mitigating taxation upon transfer.
Change and uncertainty
The BOR will remain in effect for now, but will undergo gradual changes in the coming years. Adjustments have already been made at the beginning of this year, and more are planned for 2025 and 2026, although they have not yet been finalized.
In 2024, a conditional exemption of 100% of the value of the business will apply in the gift and inheritance tax, up to a maximum of €1,325,253. For the amount exceeding this maximum, an 83% exemption applies. One of the changes announced is that from 2025, an exemption of 100% will apply over a higher value of the business, namely up to a maximum of €1,500,000. But, for the amount exceeding this maximum, a lower exemption of 75% will apply.
These changes surrounding the BOR, and the expected curtailment of the tax exemption, create uncertainty among entrepreneurs, which explains the trend in the increasing number of business transfers. This under the slogan "transfer as quickly as possible, to pay as little tax as possible.
Is this really the right line of thinking?
Ask yourself the right questions
Despite the future changes within the BOR, the intended changes to the tax facility for the purpose of business transfer are not obviously unfavorable. Yes, logically it is not in our entrepreneurial genes to voluntarily pay more tax. But paying as little tax as possible should also not be the overriding incentive to (too quickly) transfer a business.
In other words, don't do anything rash, get advice and ask yourself the right questions:
- Who is my intended successor, what must my successor meet, and is my successor already ready for an acquisition?
- Does my intended successor really want to take over my business?
- Is my business ready for transfer to the next generation?
- Am I personally ready to transfer my business?
- What do I need for a good old-age provision?
Asking yourself the right questions does not happen overnight, let alone finding the right answers. Therefore, a business transfer via gift or inheritance will not always be the answer to these questions. Selling to a strategic party, taking a stake by a private equity party or a management buy-in, all concern possible alternatives in the absence of suitable succession (in the family).
Our advice is therefore: take the time to be well thought out and prepared and do not do anything rash, as the old adage applies here: better half right than whole wrong!
