How to gift your family business at a lower cost

The three regions of our beautiful country provide that, under certain conditions, a so-called ‘family’ company may be transferred at a 0% rate. In other words, no inheritance tax is payable. Certain conditions must be met, and we will examine whether this advantageous scheme could benefit you. Will you be able to transfer your company tax-free?

 

Yes, it is possible to gift a company tax-free

This type of gift is possible in all three regions of our country. However, before you can transfer your company without being subject to tax, certain conditions must be met.

What conditions must be met?

It is the donor’s place of residence that determines which region’s rules apply, rather than the registered office of the company concerned. Therefore, the place where you have resided during the five years preceding the gift will determine which region’s laws apply to you.

The definition of a family company and the conditions governing the application of the scheme are not identical in the north and south of the country. However, all three regions require a minimum shareholding and the company to carry on a genuine and tangible economic activity. Unfortunately, this excludes property companies. We will explain the reasons for this in greater detail later.

The transferred company must also remain active for several years after the gift in question.

 

Property companies are not covered.

As mentioned above, companies operating in the property sector cannot benefit from this tax-free gift. The management or letting of property is not considered a genuine economic activity, meaning that this activity is not eligible for the tax advantage provided by gifting the company.

This is due to a presumption that there is no economic activity, which is generally the case for asset-holding companies.

 

How can it be gifted in another way?

Solution: other activities. If you own one or more other companies, you can develop the company’s economic activity by assigning all intra-group services to it (administration, accounting, treasury, etc.). Your company will thereby become an ‘active’ company and will no longer be subject to the restrictive scheme.

 

2^nd solution: a minimum shareholding: In the Brussels Region and in the north of the country, another solution is available to you. You must arrange for your asset-holding company to become a direct shareholder in your active company or companies, with a holding of at least 30%.

 

It is possible to gift it in another way. 

You can visit a Flemish notary and gift your shares before them. In this case, inheritance tax will apply if you die within three years of the deed in the Capital Region and the Walloon Region, and within seven years in Flanders.

In summary

Yes, it is possible to gift your company tax-free. The various regions impose different conditions that must be met to benefit from this advantage. Check whether you are eligible. The key principle when making a transfer is anticipation. Planning the succession of your assets is essential if you wish to minimise the tax payable, thereby transferring everything at a lower cost and passing on your company tax-free.