European Family
Business Tax
Monitor
Comparing the impact of tax
regimes on family businesses
April 2014
www.kpmg.com/fami...
1© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepen...
2© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepen...
Tax due on inheritance
4© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepen...
5© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepen...
6© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepen...
7© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepen...
Tax due on retirement
9© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepen...
10© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepe...
11© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepe...
12© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepe...
13© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepe...
14© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepe...
15© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepe...
16© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of indepe...
Thank you
To download the European Family Business Tax
Monitor report, please click here.
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss
entity. Member firms of the KPMG network of independ...
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European Family Business Tax Monitor

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In this study, we shed light on the fiscal regimes of the 23 countries, enabling a comparison of the tax impact on Family Businesses

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European Family Business Tax Monitor

  1. 1. European Family Business Tax Monitor Comparing the impact of tax regimes on family businesses April 2014 www.kpmg.com/familybusiness
  2. 2. 1© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Comparing the impact of tax regimes on family businesses ■ The comparison of countries’ tax systems is complex as all have differing tax exemptions and reliefs in operation. ■ The range of reliefs and exemptions countries offer can mean the effective tax rate can be significantly different to the headline rate. ■ In the current environment it is important that the tax strategy underpins the wider commercial and business objectives. Understanding how different countries tax business succession could impact your future strategy. ■ In this study, we shed light on the fiscal regimes of the 23 countries, enabling a comparison of the tax impact on Family Businesses
  3. 3. 2© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case study ■ John Smith has owned his Family Business, Oakwood, for over ten years. ■ He invested €1,000,000 to establish the company and has worked hard over the years to build it. The current balance sheet is shown below. The business is now valued at €10,000,000 on an arm’s-length, third-party basis (which includes €5,000,000 of goodwill). All assets in the company are used for the purposes of the business. ■ John’s wife, Sarah, died in 2010 and he has one son, David, who is 35 years old. Unfortunately John died in early 2013 and his will passed the business to David, who intends to continue the business for the next 20 years or so. ■ The following analysis explores the tax impact of John’s death and his retirement.
  4. 4. Tax due on inheritance
  5. 5. 4© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on inheritance Tax due without exemptions and reliefs ■ Taxes levied include personal income tax, inheritance tax, real estate transfer tax, duty on documents and transfer levies. ■ The range of €0 in Cyprus, Luxembourg, Poland, Romania, Slovakia, Slovenia and Sweden, to over €4m in France demonstrates the stark contrast across Europe. ■ 13 of the 23 countries have been rated ‘green’, as they would impose taxes of less than €1m. ■ These countries may be seen as ‘green’, however a tax levy of over €250,000 represents a large amount for this size of organisation. ■ Four countries are flagged ‘red’ as they impose taxes of more than €3m: France, Ireland, the Netherlands and the UK. ■ The tax landscape changes dramatically when you introduce country-by-country tax exemptions and reliefs.
  6. 6. 5© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on inheritance Tax due with exemptions and reliefs ■ When applying reliefs and exemptions to the case study, the number of countries which impose no tax increases from 7 to 13 with the Czech Republic, Germany, Hungary, Italy, Portugal and the UK joining the list. ■ Application of exemptions results in a further five countries – Belgium, Finland, Ireland, the Netherlands and Spain – reducing their tax bill to below the €500,000 level. ■ The exemptions and reliefs are not only complex but wide in their application, as are the taxes. ■ Some geographies, such as Belgium, have different regimes within a country’s tax regime. ■ In the Netherlands, the position is complicated by the ability to defer payment of part of the tax. This is not strictly speaking an exemption as the tax may become payable at some point in the future, but in practice can reduce the tax bill significantly.
  7. 7. 6© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on inheritance Summary map This graphic provides a snapshot of how the application of exemptions and reliefs can impact tax charges, with the most noticeable changes in the amount charged occurring in Belgium, Finland, Ireland, the Netherlands and Spain. Several countries fully mitigate the tax bill with full exemption available in the Czech Republic, Germany, Hungary, Italy, Portugal and the UK.
  8. 8. 7© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on inheritance Summary ■ Many Family Businesses operate internationally so understanding the differences in tax regimes across borders can be beneficial when making future investment decisions. ■ When exemptions and reliefs are available, qualification criteria met and applied to the business, the landscape changes dramatically. ■ Tax levied upon succession through inheritance, can attract as many as five different types of tax. Some countries’ tax regimes offer a far more favourable landscape than others. ■ The analysis of 23 countries represented in the survey shows that systems across Europe are neither uniform nor simple to understand. ■ Tax levied upon succession can have a real impact upon a Family Businesses future longevity. ■ In the countries covered by this survey, tax levied on succession ranges from €0 to just over €4.2m on a business valued at €10m. ■ Given that no cash is generated by the individuals or the business as a result of the business transfer, the funds to meet the tax levy must be found from other sources. ■ Families with international business operations, and potentially with family members in different parts of Europe, have a complex situation to manage and plan for. ■ It ‘s not surprising to see Family Businesses located in territories with favourable tax rates enjoying a competitive advantage.
  9. 9. Tax due on retirement
  10. 10. 9© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on retirement Tax due without exemptions and reliefs ■ In six countries no tax would be imposed upon transfer of ownership due to retirement, namely Cyprus, Poland, Romania, Slovakia, Slovenia and Sweden. ■ 17 countries impose taxes with France, Ireland, the Netherlands and Spain in the ‘red zone’, imposing a tax levy of between €2.8m and €4.2m upon a transfer of the business.
  11. 11. 10© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on retirement Tax due with exemptions and reliefs ■ 13 countries apply no tax on retirement in our hypothetical Family Business. ■ In this scenario Luxembourg no longer remains favourable (the tax due on inheritance is less) and Belgium takes its place. ■ In Denmark reliefs and exemptions do little to the level of tax payable. ■ Two countries appear in the red zone, with Malta appearing again due to a Duty on Documents (a transfer tax), highlighting that it’s not necessarily the obvious taxes that increase the costs. ■ The ‘deferral’ option available in the Netherlands could reduce the tax due to €288,283, although this could become payable at some point in the future.
  12. 12. 11© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on retirement Summary map The choice of location of a business is influenced by a number of factors, and tax is only one of these. It is interesting to note however that choosing to base a family and business in Belgium, Germany, Luxembourg or the Netherlands could result in significantly different tax bills.
  13. 13. 12© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax due on retirement Summary ■ The differing tax treatment of inheritance and retirement is interesting and such policy differences can often result in changes to the families’ behaviours. ■ Exemptions and reliefs apply to family situations in some countries, but in others are available to businesses regardless of family ownership. ■ Ensuring that a succession strategy is in place is often ranked as one of the top priorities of Family Businesses, alongside development of the next generation. ■ Tax being levied upon retirement can have an influence on the ability of a business to survive past the first generation. Again, tax is charged in many countries even though no cash has been generated as a result of the transfer. ■ Individual decisions on retirement will inevitably be influenced by the tax bill but such important decisions should primarily be driven by considering personal issues and what is in the best interests of the business. ■ In general, a transfer of the business on retirement attracts more taxes than on inheritance, with Capital Gains Tax being added to other charges.
  14. 14. 13© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. In summary Our study found: ■ the burden of taxation on succession as a result of inheritance or retirement, can vary significantly dependant on the country of operation. ■ In these difficult economic times governments need to raise revenues, and therefore reductions in inheritance and gift taxes may be difficult. ■ Policymakers understandably want to balance the generation of tax to reinvest in local economies with an element of fairness. ■ There is a lack of consistency across Europe in the levying of tax and that the tax literate – those who are aware of exemptions and reliefs and that qualify for them – can make large tax savings. ■ Families must ensure they understand and, where relevant, qualify for all exemptions and reliefs available. ■ In summary many countries do impose conditions on the past and future ownership of the Family Business.
  15. 15. 14© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Methodology The European Family Business Tax Monitor is based on the findings of 23 countries who undertook a taxation review on two scenarios for Oakwood, a Family Business valued at €10m. This first Monitor has looked into the effects taxation can have on the transfer of the business to family members upon inheritance and retirement. Each participating country was given two case studies and a questionnaire to complete providing details on how their country would tax each event. Further research and analysis was then undertaken to highlight key trends in relation to exemptions and reliefs. The 23 countries engaged in the study are: ■ Austria ■ Belgium ■ Czech Rep. ■ Cyprus ■ Denmark ■ Finland ■ France ■ Germany ■ Greece ■ Hungary ■ Ireland ■ Italy ■ Luxembourg ■ Malta ■ Netherlands ■ Poland ■ Portugal ■ Romania ■ Slovakia ■ Slovenia ■ Spain ■ Sweden ■ UK
  16. 16. 15© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Country contacts Christophe Bernard Partner, Global Head of Family Business T: +33 (0) 1 5568 9020 E: cbernard@kpmg.fr Austria Yann-Georg Hansa Partner, KPMG T: +43 (0) 1 3133 2446 E: yannhansa@kpmg.at Dr. Eugen Strimitzer Partner, KPMG T: +43 (0) 2 2362 4540 250 E: estrimitzer@kpmg.at Belgium Luc Vleck Partner, KPMG T: +32 (0) 2 708 4120 E: lvleck@kpmg.com Kizzy Wandelaer Director, KPMG T: +32 (0) 3 821 1927 E: kwandelaer@kpmg.com Cyprus Demetris Vakis Partner, KPMG T: +357 22 209 000 E: dvakis@kpmg.com George Markides Partner, KPMG T: +357 22 209 000 E: gmarkides@kpmg.com Czech Rep. Milan Blaha Partner, KPMG T: +420 222 123 809 E: mblaha@kpmg.cz Pavel Rochowanski Partner, KPMG T: +420 222 123 517 E: prochowanski@kpmg.cz Finland Ari Engblom Partner, KPMG T: +358 (0) 20 760 3614 E: ari.engblom@kpmg.fi Risto Heinänen Partner, KPMG T: +358 (0) 20 760 3764 E: risto.heinanen@kpmg.fi France Jacky Lintignat Partner, KPMG T: +33 (0) 1 5568 9036 E: jlintignat@kpmg.fr Delphine Cabon Senior Manager, KPMG T: +33 (0) 1 5568 9065 E: dcabon@kpmg.fr Germany Dr. Christoph Kneip Partner, KPMG T: +49 (0) 211 475 7345 E: ckneip@kpmg.com Kay Kloepping Partner, KPMG T: +49 (0) 521 9631 1390 E: jsievert@kpmg.com Greece Christian Thomas Partner, KPMG T: +30 21 11 815 815 E: christianthomas@kpmg.gr Angela Iliadis Partner, KPMG T: +30 21 06 062 116 E: ailiadis@kpmg.gr Hungary Mihály Gerhát Senior Manager, KPMG T: +36 1 88 77 180 E: mihaly.gerhat@kpmg.hu Zoltán Mádi-Szabó Senior Manager, KPMG T: +36 1 88 77 331 E: zoltan.madi-szabo@kpmg.hu Ireland Colin O’Brien Partner, KPMG T: +353 (0) 1 410 1679 E: colin.obrien@kpmg.ie Olivia Lynch Partner, KPMG T: +353 (0) 1 410 1735 E: olivia.lynch@kpmg.ie Italy Gianluca Geminiani Partner, KPMG T: +39 071 290 1140 E: ggeminiani@kpmg.it Massimo Anticoli Associate Tax Partner, KPMG Studio Associato T: +39 075 573 4518 E: manticoli@kstudioassociato.it
  17. 17. 16© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Country contacts Luxembourg Gilles Poncin Director, KPMG T: +352 22 51 51 7230 E: gilles.poncin@kpmg.lu Louis Thomas Partner, KPMG T: +352 22 51 51 5527 E: louis.thomas@kpmg.lu Malta Anthony Pace Partner, KPMG T: +356 2563 1137 E: anthonypace@kpmg.com.mt Doreen Fenech Director, KPMG T: +356 2563 1017 E: doreenfenech@kpmg.com.mt The Netherlands Olaf Leurs Partner, KPMG Meijburg & Co T: +31 (0) 76 523 7514 E: leurs.olaf@kpmg.nl Maarten Merkus Partner, KPMG Meijburg & Co T: +31 (0) 20 656 1337 E: merkus.maarten@kpmg.nl Portugal Vitor Ribeirinho Partner, KPMG T: +351 21 011 0161 E: vribeirinho@kpmg.com Luis Magalhães Partner, KPMG T: +351 21 011 0087 E: lmagalhaes@kpmg.com Romania Dragos Doros Director, KPMG T: +40 (0) 372 377 750 E: ddoros@kpmg.com Slovakia Rastislav Begán Director, KPMG T: +421 (0) 2 5998 4612 E: rbegan@kpmg.sk Branislav Ďurajka Partner, KPMG T: +421 (0) 2 5998 4303 E: bdurajka@kpmg.sk Slovenia Nada Drobnič Partner, KPMG T: +386 (0) 1 420 1149 E: ndrobnic@kpmg.com Spain Juan Jose Cano Ferrer Partner, KPMG T: +34 914 563 818 E: jjcano@kpmg.es Juan Rodriguez-Loras Dealbert Partner, KPMG T: +34 914 563 414 E: juanrodriguez16@kpmg.es Sweden Patrik Anderbro Partner, KPMG T: +46 (0) 21 4950 738 E: patrik.anderbro@kpmg.se Lars-Erik Liljeström Director, KPMG T: +46 (0) 26 150 610 E: lars-erik.liljestrom@kpmg.se UK Gary Deans Partner, KPMG T: +44 (0) 141 300 5811 E: gary.deans@kpmg.co.uk
  18. 18. Thank you To download the European Family Business Tax Monitor report, please click here.
  19. 19. © 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (KPMG International). The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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