What are the taxes for transferring a family business between generations

A new report, KPMG Private Enterprise Global Family Business Tax Monitor, compares tax implications for transferring a family business across 54 countries and territories.

The survey shows that for a transfer of a family business valued at EUR 10 million, out of 54 countries surveyed, 14 have a specific inheritance tax that applies (15, if we also count the US that applies a wealth tax for family business inheritance), while 16 have a gift tax that would apply to lifetime transfers of the business.

Of the 10 countries with the largest GDPs in the survey, six (Brazil, Canada, France, Germany, US, UK) have taxes that apply both for inheritance and lifetime transfers, while four (China, India, Italy and Russia) have neither gift nor inheritance tax on transfer of a family business. 

Other taxes, such as capital gains tax and personal income tax, are applied in some jurisdictions as well.

In Romania, according to the current tax legislation, there are no taxes on inheritance or gifts when passing the family business to the next generation. (Some taxes may apply for real estate transfers, which are not part of the business).

While there are tax reliefs in most jurisdictions that can lessen the burden on families transferring their business, many of these are coming under increased scrutiny and families need to be prepared for change.

For example, in the US, families transferring a business currently benefit from a gifts and estates exclusion of US$10 million, with an annual inflation adjustment (US$11.58 million for 2020) – the exclusion presently has effect until 2026, but there is the potential for the exclusion to be modified or eliminated.

Similarly, families in the UK benefit from business property relief (BPR) in transferring a business, but there are proposals that could modify or remove this relief.  

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