Are there any exceptions to inheritance tax for family businesses?
April 26, 2023 | 40,00 EUR | answered by Wilhelm Ackermann
Dear tax advisor,
My name is Fred Schlattmann and I have a question regarding inheritance tax in relation to family businesses. My father recently passed away and has left me his company, which has been run in our family for several generations. I am now worried about the inheritance tax that could be levied on the company.
The company is my livelihood and I would like to continue running it to carry on the tradition of our family. However, I have heard that family businesses can be exempt from inheritance tax in certain cases. Is this true and what conditions would need to be met in order to benefit from this exception?
My biggest concern is that the inheritance tax could be so high that I am forced to sell parts of the company in order to meet the tax burden. This would not only jeopardize my livelihood, but also question my family's inheritance.
Can you please explain to me if there are any exceptions to inheritance tax for family businesses? Are there ways to reduce or avoid the tax burden? I would greatly appreciate your professional advice and support on this matter.
Thank you in advance.
Sincerely,
Fred Schlattmann
Dear Mr. Schlattmann,
Thank you for your inquiry regarding inheritance tax in relation to family businesses. It is understandable that you are concerned about inheritance tax, especially if the business has been run by your family for several generations and holds significant importance for you.
There are indeed exceptions and benefits for family businesses when it comes to inheritance tax. These regulations are designed to ensure that businesses remain within the family and that jobs can be secured. One of the most important benefits is the so-called "needs test", where it is assessed whether the heir can continue to run the business without selling parts of it for financial reasons. If it can be proven that a sale would be necessary to pay the inheritance tax, a tax exemption or reduction may be granted.
Another important aspect is the "relief provision" that applies to the transfer of business assets. A certain portion of the business assets can be transferred tax-free, as long as the business is continued for at least five years and certain conditions are met. Again, a needs test is crucial here.
To reduce or avoid the tax burden on your family business, it is advisable to seek advice from an experienced tax advisor early on. Together, you can explore the tax options and strategies to find an optimal solution for your specific situation.
I hope this information is helpful to you and I am available for further questions or a personal consultation.
Best regards,
Wilhelm Ackermann
