The reform of inheritance tax could entail a greater burden on company heirs in the context of business succession than was hitherto thought to be the case. The government’s plans are coming under fire.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: The issue of business succession is high on the agenda of many family businesses. The older generation wishes to slowly withdraw from the business and retire, and the children or other relatives are supposed to continue running the firm. The necessary reform of inheritance tax could place a greater burden on company heirs in the course of this than has hitherto been assumed.
In little more than half a year, the reform of inheritance tax needs to be ready. The plans brought forward by Germany’s Federal Minister of Finance, Wolfgang Schäuble, continue to spark criticism. While there had been talk up to now of minimal changes, it turns out that company heirs might now be asked to pay significantly larger sums. According to media reports, if the government’s plans are implemented then the exchequer would rake in additional annual revenues of around 1.5 billion euros in the long run. A figure in the region of 200 million euros had been expected until now. Critics believe that these plans will make transferring a company substantially more difficult and are worried about jobs. There is still no agreement as to what exactly the reform of inheritance tax ought to look like. A decision is not anticipated to be forthcoming until the new year.
It was a ruling of the Bundesverfassungsgericht (Federal Constitutional Court) that rendered it necessary to reform inheritance tax. The Court stated here that the current rules which confer favourable treatment upon company heirs are at least partially unconstitutional. The government has until the summer of 2016 to improve these. The only thing that can be said for certain at this stage is that company heirs should expect cuts.
Firms that are soon to be faced with business succession ought to take action early on and arrange the transition so that it is as gentle as possible both for the business assets and the heir. In doing so, it is important to take account of tax issues as well as issues pertaining to succession law. It is therefore essential to obtain comprehensive and interdisciplinary legal advice. Businesses that are affected can turn to law firms which have a high level of expertise in the fields of company, succession and tax law.