Donation of the business to a family member

Verified 05 May 2023 - Legal and Administrative Information Directorate (Prime Minister)

You have the possibility to pass on your funds to one of your heirs (child or family member) without asking for financial consideration. The donation of the goodwill is subject to the fulfillment of many formalities. The purpose of these formalities is to ensure the protection of the donor (you), the beneficiary (the buyer) and the creditors of the fund.

The transfer of the fund to an heir can be carried out in several ways:

  • Simple donation : in the presence of a single child, this act allows you to transfer ownership of your business to an heir, without financial consideration.
  • Donation-sharing : if there are several children, this act allows you to distribute your property among the different heirs.
    One receives property from the company, the others receive gifts of property and money.
    If the goodwill constitutes the majority, or even almost all, of your assets, it is up to the beneficiary of this gift to compensate the other heirs by paying a sum of money, called payoff.

Please note

you can make the simple donation and the donation-sharing for your children and grandchildren, your brothers and sisters and your nephews and nieces. It is irrevocable and takes place before a notary.

The transfer of goodwill involves the transfer of the following items.

Intangibles

  • Clientele
  • Sign and trade name
  • Right to lease : right to take over from the holder of a commercial lease, occupy the premises and enjoy a right to renewal of the lease
  • Employment, insurance and publishing contracts
  • Property rights literary, artistic and industrial (patents, software, trademarks, domain name)
  • Licenses or administrative authorizations for regulated businesses. For example, pharmacies or beverage outlets.

Body parts

  • Furniture
  • Hardware and tooling : property required for the operation of the fund (machinery, computers, offices)

It is advisable to determine precisely which are the goods included in the transfer to avoid possible disputes between heirs.

The stock of goods is not included in the value of the goodwill, it is valued separately.

The transfer of the goodwill does not understand the following:

  • Claims and liabilities : loan repayment obligations and operating debts are not passed on, you have to pay them
  • Building (premises in which the fund is operated)
  • Miscellaneous Contracts : (for example, supplier contract) except lease, work, and insurance contracts that are passed automatically
  • Books of commerce and accounting documents : these documents are not transmitted, they must only remain at the disposal of the purchaser for 3 years.

Please note

you and the purchaser may provide that the transfer of the goodwill also include the transfer of those other items, including debts and the premises (if you own them).

The deed of assignment must be filed with the tax office of the registration without waiting if it is a privately signed document or, in a 1-month period after the sale is signed, if the authentic instrument.

You must submit to the registration department, on site or by mail, the following items:

  • Deed of transfer of the goodwill in 2 copies
  • Trade Transfer Declaration Form in 3 copies
  • Form for declaring the condition of equipment and goods transferred in 3 copies
  • Payment of registration fees (in cash up to €300, by check or by transfer)

Declaration of transfer of goodwill or goodwill

Declaration of transfer of goodwill or goodwill: condition of equipment and new goods transferred

Who shall I contact

When you make a donation, the tax authority collects a registration fee, a tax called gift tax.

Donation fees are paid by the purchaser.

However, you can decide to take them at your expense, the amount of duty shall not be considered as a donation supplement.

To calculate this tax, the registration department proceeds as follows:

  1. It takes into account the value of the gift.
  2. He then deducts from this first value the amount of any deductions.
  3. Finally, it applies a tax scale to the value found.

The amount of the rebate and the tax rate vary depending on the relationship between the donor (you) and the donee.

Example :

You give your son a goodwill worth €320,000No, that's the value of the donation. A donation to one of your children has 2 consequences:

  • A reduction of €100,000 applies, i.e. 320 000 - 100 000 = €220,000.
  • The scale of taxation shall be 20%.

Thus, you or your son (at your choice) will have to pay a transfer fee equivalent to 20% of €220,000, or €44,000 of rights.

Additional specific discounts are available in 2 special cases.

Pact Dutreil

The transmission of family companies is facilitated by the Dutreil system, which gives the right to partial exemption donation rights, up to 75% the value of the company.

In other words, only a quarter (25%) of the value of the company will be taken into account to calculate the amount of the gift tax.

The Dutreil Pact applies if 3 cumulative conditions are respected:

  • You held the company for at least 2 years. No time limit is required if you created the company you sent or purchased it yourself free of charge.
  • Each recipient of the gift undertakes to keep the company and the assets allocated to it for 4 years
  • One of the beneficiaries must undertake to carry on the company's activities for 3 years from the time of transmission.

Warning  

the Dutreil scheme is only applicable to companies engaged in industrial, commercial, craft, agricultural or liberal activities. Companies which have as their object the management of a movable or immovable property (for example SCI) are excluded.

Early transmission

If you have under 70 at the time of transmission, a further reduction of 50% transfer duties apply to the taxable part of the donation.

The mechanism of early transmission is combined with the possible reductions and advantages of the Dutreil Pact.

The publication formalities are mandatory and make the assignment enforceable against third parties.

Declaration in a legal advertisement medium

The deed of assignment must be published in a legal listing support in a 15-day period after the sale is signed. If it is an act of assignment under private signature, that publication must be preceded by its registration with the tax department responsible for registration. L'authentic instrument The transfer may be published before registration.

The advertisement must include the following information:

  • Elements concerning the registration of the document (office, date, volume, number)
  • Date of transfer
  • Surnames, forenames and domicile of the transferor (you) and of the transferee (the transferee)
  • Nature and seat of the fund
  • Selling price and breakdown between tangible and intangible items
  • Time limit for possible opposition by creditors

Publication in Bodac

The purchaser must register the legal advertisement at the Commercial Court Registry within a period of 3 days after it is published in a legal advertisement medium.

Who shall I contact

The Commercial Court will transmit for publication in the Official Bulletin of Civil and Commercial Advertisements (Bodacc).

Immediate taxation of profits

The transfer of the goodwill shall entail the immediate taxation of profits since the end of the last completed financial year until the date of transmission.

Profits will be taxed on income (IR) or business tax (IS), depending on your company's situation.

You must send a tax return to the tax department (SIE) in the 60 days from the publication of the assignment in a legal listing support.

2023 Income Statement 2022 - Industrial and Commercial Profits (BIC)

Non-Commercial Profits (NTB) - Controlled Reporting Regime

Who shall I contact

Value added tax (VAT)

The total transfer of the goodwill shall entail the payment of VAT perceived.

If you are liable for VAT, you must make a VAT return to the company Tax Service (SIE) within a period of 30 days from the publication of the assignment in a legal listing support.

This period is extended to 60 days if you are placed under the simplified tax system.

However, this transaction is exempt from VAT:

  • If the sale is for theentirety of the goodwill elements
  • What if the buyer is itself liable for VAT.
Who shall I contact

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