Given the importance of family firms across Germany, with 90% of all businesses being family owned, and an ongoing split in Parliament, it appears that changes are afoot to enable family firms to pass the business to the next generation with the deal exempt of IHT for many provided they keep the business running for seven years.
It does raise the issue that succession as a transaction can give rise to tax liabilities and it is not unheard of for the next generation in some instances to have to sell off part of their inherited estate in order to pay the charges.
Clearly, a change in the legislation will provide some certainty for business owners once finalised and enable them to plan for the future accordingly.
Tax planning when it comes to succession and the tax reliefs that can be obtained are complex the world over, and constantly changing, so it is always best to ensure that you seek professional advice well in advance of any transaction taking place.
Planning is essential for all family firms.
German politicians have agreed to changes in the tax rules for people who inherit companies, paving the way for the resolution of a two-year dispute that has caused huge legal uncertainty for the country’s family-owned businesses. Under the deal thrashed out by a parliamentary mediation committee in the early hours of Thursday morning, most German company heirs will still be freed from inheritance tax if they keep their business running for at least seven years, and protect jobs and wages. But the criteria for eligibility will be tightened.