Under the BOR, the tax burden involved in a business succession can, in some cases, be reduced by up to 40%. In addition, income tax can be deferred. If the business is inherited or gifted, a substantial exemption in gift or inheritance tax may apply. And if any tax is due, you can often benefit from a favourable payment arrangement with the Tax Administration.
The business succession facilities are available to all legal structures. It doesn’t matter whether your company is a private limited company (B.V.), sole proprietorship, general partnership (vof), professional partnership (maatschap), or another form. The BOR is widely used in family business successions among SMEs and in the agricultural sector.
The Dutch government intends to improve the efficiency and practicality of the business succession scheme for gift and inheritance tax (BOR), as well as the deferral scheme in income tax for business successions (DSR). It is also looking to remove as many obstacles for business owners as possible. For that reason, the BOR has been revised as of 2024.
Stay informed by signing up for our newsletter.
Although the BOR, or business succession scheme, is a very fiscally attractive option, it does come with specific requirements. A few key requirements include:
As you can imagine, these conditions, along with ongoing legislative changes, clearly show that it’s never too early to start preparing for a business transfer. There’s far more involved than just meeting the tax conditions.
In many cases, the BOR only works effectively if your prenuptial agreement and will are set up to ensure the business passes to your intended successors. We’re happy to advise you on how to structure your fiscal setup, prenuptial agreements, and wills as part of your estate planning in order to take full advantage of the BOR.
The benefits of the BOR are shown below with a practical calculation example.
How much can you save with the BOR?
Suppose a mother who runs her business as a private limited company transfers the business to her two children. The business is valued at €2.5 million. The mother makes use of the business succession scheme by gifting 50% of the shares in the company to each of her children.
Each child owes a gift tax of approximately €10,500 on the gift of €1.25 million.
The mother can pass on the income tax claim (2024 figures: 33%) on the gift to the children. The income tax levy in box 2 is deferred.
Suppose the mother decides to sell her business to a third party for €2.5 million. After the sale, the mother's private limited company has €2.5 million in liquid assets. The sale converts business assets into investment assets. If the mother then decides to gift the shares in the private limited company to the children, the tax consequences are as follows:
The mother must pay a total of €825,500 in income tax. Because the mother is now paying income tax, the children will be able to withdraw €2.5 million from the private limited company tax-free in the future.
Each child owes a rounded amount of €235,000 in gift tax on the gift.
The total tax payment in connection with the gift
Do you still have questions, or would you like to know whether you qualify for the BOR? We’re happy to explore the possibilities with you. questions or want to know more.
