The Dutch business succession regulation 

As the e-commerce market continues to develop, we are also seeing regular business owners regulations being applied more frequently. One of the schemes we occasionally receive a question about is the "business succession regulation", in the Netherlands this is also known by the Dutch abbreviation "BOR". In this article we will explain what this scheme entails and how you can benefit from it.

What is the business succession regulation?

The business succession regulation is a partial exemption from tax obligations when acquiring business assets by inheritance or gift. The business succession regulation is included in the Inheritance Act and aims to ease business successions by removing (in part) tax obstacles.

When does the business succession regulation apply?

There are two situations in which the business succession regulation can be applied: the most common situation is where the owner of a family business retires (or simply moves on) and wishes to transfer his business assets through inheritance to a family member. The second situation assumes business succession through inheritance within the family because the old owner of the business has died.

What is the advantage of the business succession scheme?

If you can successfully apply for the business succession scheme, you will enjoy a substantial exemption from gift tax or inheritance tax: the business assets acquired by gift or inheritance will be fully (100%) exempt up to €1,134,403 (2022) and 83% exempt for the remaining business assets.

It is important that the value of the business assets is determined objectively by a third party on a going concern basis (i.e. it is assumed that the current situation continues).

For the remaining inheritance tax you can also apply for an interest-bearing deferral of payment for a maximum period of 10 years. All in all, the benefit is thus generous!

How do I take advantage of the business succession scheme?

If you acquire business assets by gift or inheritance, you must file an inheritance tax return with the tax authorities. In this return, you must explicitly invoke the business succession regulation. 

Our advice is to enlist the help of a financial expert, because the consequences (and benefits) can be considerable!

What are the conditions to the business succession regulation?

The business succession regulation applies if business assets are donated or inherited. First, therefore, there must be actual business assets (determined on the basis of going concern or, in the worst case, liquidation).

Next, in the case of a gift, the business in question (the business assets) must have been in the possession of the donor for at least 5 years prior to the gift. In the case of inheritance, the required period of possession is shorter for testators, namely one year.

Finally, the transferee of the business assets must continue (hold) the business in question for at least 5 years.

Conclusion business succession scheme

It will have become clear to you: the business succession scheme is a generous scheme in the event of inheritance or donation of business assets (the actual business succession) within the family.

Within our e-commerce industry, the scheme is still only applied to a limited extent, but this will undoubtedly change over the next ten years and then a correct application of the scheme will be worth its weight in gold!

Want to know more about this scheme? Contact us for tailored advice or a referral to the right specialist.