Gift and inheritance tax: the family company
Anchoring the family company in the family is supported by the legislator
through particularly advantageous tax systems for gift and decease. Preservation
of these advantageous schemes is subject to a number of conditions, some of
which must still be fulfilled many years later.
Advantageous tax regime
When a family business is donated, no gift tax is due.
In case of inheritance
of the company, a rate of 3% applies if the company passes to heirs in the
direct line or to the partner, and a rate of 7% in all other cases.
A number of conditions must be met beforehand. For example, it must be family
businesses with a real activity; real estate companies are therefore
But other conditions still have to be met after the gift or
inheritance. For example, real economic activity must be continued for at least
three years and a capital preservation condition applies.
Preservation of capital
One of the conditions that is sometimes lost out of sight of is the condition of
'capital preservation'. Under the old company legislation, this was a clear
fact: the share capital was not allowed to decrease through distributions or
repayments after the gift or death. But the new company law, which has been
applicable since 1 May 2019, also includes capitalless companies. The condition
of capital retention therefore had to be adapted to this new situation.
NVs still have a share capital under the new Companies and Associations Code.
Nothing changes for them. As under the old legislation, the capital of an NV may
not drop through distributions or repayments during the three years after the
death or after the gift.
However, if you have a BV whether it is a converted BVBA or a new BV , the
capital retention condition no longer refers to the capital of the company, but
it is required that the 'equity' of the company does not decrease due to
distributions or repayments below the amount of the contributions made at the
time of death or the deed of gift, as shown in the annual accounts'.
Therefore, only the annual accounts are considered. This means that
shareholders' equity could drop below that limit during the financial year, as
long as it is restored by the end of the financial year, when the annual
accounts are drafted.
The concept of 'equity' is also broader than the concept of capital, which means
that a distribution of tax capital is possible if, on the other hand, there is a
corresponding increase in equity.
The 3-year term is no longer what it used to be. After all, the annual accounts
of the company are examined to determine whether there has been a decrease in
shareholders' equity with regard to the date of death. This means that the
equity must at least remain at the same level in the 3 annual accounts after the
death or the gift.
Also note that only a decrease in equity as a result of a distribution or
repayment of equity is considered. If the equity of the company decreases due to
losses, this has no impact on the exemption or reduction.
If the conditions for the exemption (in the case of a gift) or reduction (in the
event of death) are not met or the conditions are no longer met, then the
exemption or reduction will in principle not be granted or will be lost
This is not the case with a decrease in equity: there is then 'only' a
proportional decline in the favorable regime. As a result, the amount of the
distribution or repayment will be taxed at the normal rate, to the extent that
the equity falls below the lower limit.
Many entrepreneurs set up a savings account in their company for their
retirement. There is also a special tax system for that piggy bank, better known
as the liquidation reserve. Keep in mind that the liquidation reserve is not
part of the contributions, but is part of the equity. If such a reserve is
therefore paid out, it may happen that the shareholders' equity falls below the
amount on the date of gift or death. In that case, the exemption or reduction
will effectively be lost.