Family businesses are concerned. Because there are plans on the table to increase the tax on the inheritance or donation of a family business.
Favorable arrangements still apply, specially designed to ensure that owners can pass their businesses on to the next generation. As a result of the schemes, for example, no or less money from the company is spent on inheritance tax if the owner dies.
The Central Planning Bureau and the Ministry of Finance have written critical reports about the schemes: they hardly achieve what they are intended for. It is therefore likely that the tax regulations will be on the formation table. D66 advocates austerity, PvdA and GroenLinks want abolition.
‘Conservation risk for companies’
According to John Fentener van Vlissingen, a retrenchment of the tax benefit would be very unwise. The entrepreneur founded the Stichting Familie Onderneming in 2012. His family is one of the largest entrepreneurial families in the Netherlands.
“Since Napoleon my family has been in companies and one of my family has been at the forefront of a company.” He fears that the continuity of family businesses will be jeopardized by austerity measures.
Bastiaan Brugman is also concerned. He has been the owner of a grass seed company since 2011, which has been around for four generations. Austerity in the BOR would “mean the end of many family businesses,” he says:
‘Sleepless nights of austerity in the BOR’
The two schemes in question are the Business Succession Scheme (BOR) – a tax exemption for family businesses and the Transfer Scheme (DSR). The purpose of the BOR and the DSR is to make it easier for a family member to continue with a business.
For example, companies up to a value of more than one million euros are fully exempt from inheritance or gift tax. For a value in excess of one million, an exemption of 83 percent applies. This is to prevent a company from running into financial difficulties after a transfer.
BOR has ‘gift effect’
But the tax exemptions miss their mark. In 2016, the Council of State called the BOR “definitely unbalanced with regard to gift and inheritance tax”. Last year, the Ministry of Finance advised in a report to the House to reduce the BOR and DSR. About the BOR: “The effectiveness of this exemption is limited, while this wealth inequality has a strong effect.”
A calculation in the report shows that large family businesses in particular benefit from the BOR. Moreover, it appears that most companies have enough money to pay inheritance or gift tax even without the special scheme. According to the report, the current BOR has a “gift effect”.
‘It doesn’t get you anywhere’
Stichting Familie Onderneming and network for family businesses FBNed commissioned a study by KPMG into the consequences of the abolition of the BOR and DSR. According to Fentener van Vlissingen, the results are clear. He thinks companies will be sold or relocated abroad, where the rules are more favorable.
“The result is that unemployment will increase. VAT and corporate tax will be less, so abolition will be of no benefit to the government.” Fentener van Vlissingen also does not see austerity. “Do we have to attack the family businesses now after Covid? I don’t think so.”
It is not obvious that a new cabinet will soon completely abolish the BOR and DSR, he says News houreconomist Mathijs Bouman. “If you look at the political landscape, I don’t see that happening.” VVD and CDA want to keep the BOR.
Bouman understands that politicians are considering changes to the favorable scheme: “In the Netherlands, we levy a lot of tax on labor and less on capital. You can see that more and more thought is now being given to this.”