This is the moment to take action
Transferring a successful business to the next generation or a successor requires careful planning. Thanks to the fiscal Business Succession Regulations (BOR), heirs and beneficiaries can save significantly on the tax burden in the event of a transfer. Given the announced tightening of the rules, now is a strategic time to start your business succession process.
Why start your business succession now?
The BOR offers a tax-favourable scheme whereby less or even no tax has to be paid in the event of a business succession. This applies to the part of the company considered as business assets.
In addition to the BOR, there is also the pass-through scheme (DSR) in income tax, which allows tax deferral on a transfer of shares with a substantial interest.
The proposed changes, expected to take effect from 2026, could change the tax benefits. This makes it essential to act in time to take full advantage of current arrangements.
Tax benefits in business succession
1. Gift and inheritance tax
A gift or inheritance tax exemption can be claimed when a company is gifted or inherited. For 2025:
- A full exemption up to €1,500,000.
- An exemption of 75% applies to the remaining company assets.
Conditions for this scheme include:
- The transferee must be 21 years of age or older.
- It must be business assets.
- The donor must have owned the holding for at least five years, or in the case of inheritance, at least one year.
- The transferee must continue the business for at least three years.
2. Income tax
When transferring a business or a substantial interest in a company, the income tax claim can be passed on to the transferee. This prevents immediate taxation and shifts the tax liability to a later date. The acquisition price is carried forward, leaving future capital gains taxed under the Box 2 rate.
Conditions on donation:
- The transferee has been co-entrepreneur or employed by the company for at least three years.
- A minimum age of 21 applies to gift of shares.
The impact of the announced changes
The government has announced several changes, including:
- Stricter rules for preference shares: shares with priority in profit distribution or liquidation are more strictly covered.
- Simplified restructuring: changes in legal form allowed without loss of tax benefits.
- Long possession period for older entrepreneurs: the possession period for entrepreneurs above the state pension age will be extended.
- Limiting the "BOR carousel": the BOR can only be applied once per company.
- Restriction to ordinary shares: the facility applies only to ordinary shares with a minimum interest of 5%.
- Family businesses: smaller interests (below 5%) can also benefit from the BOR under certain conditions.
As some changes are subject to European law, the exact implementation date is still uncertain. This makes timely action all the more important.
Business valuation: essential for the BOR
An accurate business valuation is crucial to claim the BOR facilities. The Tax authorities accept the Discounted Cash Flow (DCF) method as a standard valuation method. This involves determining the future economic value of the company based on expected cash flows.
A good business valuation:
- Provides insight into the true value of the business.
- Substantiates the tax claim for the BOR.
- Helps in strategic decision-making on business succession.
In addition, a business valuation can help with financing issues, negotiations with potential buyers or successors and structuring the transfer. Entrepreneurs who do not yet have a recent business valuation would do well to start this process in good time.
Strategies for a smooth business succession
Besides the tax advantages and legal aspects of business succession, strategic and emotional factors also come into play. A well thought-out transfer required:
- A clear vision and planning - What are the long-term goals for the company and its successor?
- Engaging all stakeholders - How do you ensure a smooth transition for employees, customers and suppliers?
- Legal and tax optimisation - Which structure best suits your situation?
- Coaching and mentoring the successor - How can the knowledge and experience within the company be transferred effectively?
Taking action: what can you do now?
- Analyse your situation - Is your business suitable for the BOR?
- Get a business valuation done - Get a thorough valuation report.
- Plan your succession carefully - Work with tax and legal experts to optimise your transfer.
- Take advantage of current schemes - Take advantage now before the changes take effect.
- Communicate your plans in time - Involve employees and stakeholders in the transition.
- Work with your successor - A step-by-step handover ensures continuity and long-term success.
With the right preparation, you can ensure that your business is transferred for tax purposes and your successors are not unduly burdened. Timely engagement is the key to a successful business succession.
Text: Bart Maes
