Business succession facilities

Business succession scheme

The transfer of business assets by donation or succession, may result in the levying of gift or inheritance tax. To avoid that the continuity of a company is jeopardized by this, the business succession scheme (bedrijfsopvolgingsregeling, BOR) can be used. As a result, no or less inheritance tax or gift tax is due.

Transfer facility

The transfer of business assets often leads to the levying of income tax. There are various transfer facilities (doorschuifregelingen, DSR) which ensure that this levy is deferred in certain situations, so as not to jeopardize the continuity of the company. One of those transfer facilities is specifically aimed at granting a substantial interest (doorschuifregeling aanmerkelijk belang, DSR ab). A substantial interest is, simply put, an interest that represents at least 5% of the shares in a company.

No rented property facility

In principle, only business assets are eligible for the BOR and DSR ab. This leads to a great deal of discussion, especially on rented property: whether it is investment equity capital or business asset. From 2024 onwards, rented property is always investment equity capital for the BOR and DSR ab. This also applies to tie-in purchases that are still currently classified as business assets. Rented property is now defined as property which is actually made available for more than 10% to third parties. If this is not the case at the time of transfer, but if the property is intended for that purpose, then it is also considered investment equity capital.

• Take note! Short-term provisions, like for hotel rooms, are not covered by the proposed measure. This also applies to seasonal lease agreements.
• Take note! There is a time-proportional approach to property that is used for part of the year in the own company and is rented for the other part of the year.

Discontinue efficiency margin

The BOR and DSR ab contain an efficiency margin: for companies subject to corporation tax, the investment equity capital of up to 5% of the business assets is considered to be business assets. This will allow use to be made of the BOR and DSR ab for part of the investment equity capital. It is proposed to discontinue the efficiency margin for the BOR as of 1 January 2025. The margin will also be discontinued for the DSR ab, but this can only be implemented later. The timing is still to be determined.

Used for personal and business purposes

For the BOR and DSR ab, assets classify as business assets if a fixed asset is a mandatory business asset (usually up to 10% private use) or a free choice asset that is classified as a business asset (business use between 10% and 90%). In such a case, the free choice asset as a whole is currently considered to be a business asset for the BOR and DSR ab. It is now proposed that only the part of the fixed asset that is used commercially should be considered as business assets for the BOR and DSR ab. The envisaged effective date of this change to enter into force is 1 January 2025.

• Tip! The measure is limited to fixed assets with an economic value of at least € 100,000 and non-business usage of more than 10%.
• Take note! This means that the percentage of non-business usage must be determined for various fixed assets. This will result in additional costs in the event of a business transfer.

Discontinued DSR ab employment requirement

The DSR ab can only be applied at present if the business successor has been employed for at least thirty-six (36) months by the company whose shares are being donated. It has been proposed that this employment requirement should be discontinued as from 2025.

• Take note! There is also a transfer facility for the transfer of a company for income tax purposes inter vivos (during lifetime). Such a transfer facility also has an employment requirement, but this will not be discontinued.

Minimum age of recipient on donation

It has been proposed to introduce a minimum age for the recipient of a donated enterprise. Only if the recipient is at least twenty-one (21) years old can the BOR and DSR ab be applied. The aim is to prevent unintended use of the schemes. Introduction of the minimum age is planned for 1 January 2025.

• Take note! The minimum age will not apply to business succession as a consequence of a death, because unintended use is not often relevant.

Adaptation of exemption for business succession scheme

The business succession scheme (BOR) now exempts 100% of the economic value of the company on continued operation up to an amount of € 1,205,871 per company (which amount is indexed annually). If the value is higher, an exemption of 83% applies for the exceeding part. From 2025 onwards, on continued operation 100% of the value will be exempted up to an amount of € 1,500,000. For the exceeding part, only a 70% exemption applies.

Restriction on qualifying substantial interests

The BOR and DSR ab apply to substantial interests. These are interests of at least 5% of ordinary shares in a company, but also other smaller interests. From 1 January 2026, it is proposed to restrict the schemes mainly to ordinary shares with a minimum share of 5% in the subscribed capital, so that the scheme is more targeted at family businesses. However, the schemes continue to apply to preference shares issued in the context of a business succession and to certain diluted interests.

• Take note! This measure will further be developed in the 2025 Tax Plan.

Holding and continuation requirement of business succession scheme

The business succession scheme (BOR) can only be applied if the testator or grantor had already owned the company for a certain period of time and the company is continued by the recipient for a certain period of time. It is proposed to ease the holding and continuation requirement. It is being examined how a reduction in the five-year period can be detailed. This proposal will further be developed in the 2025 Tax Plan. The envisaged effective date is 1 January 2026.

Approach to business succession scheme construction

The 2025 Tax Plan will elaborate a proposal to deal with abuse of the business succession scheme (BOR) by means of constructions. This includes, for example, the conversion of non-business assets into business assets for the sole purpose of advantageous transfer of such assets. This envisaged effective date for these measures is 1 January 2026.

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