Business Assets Tax Relief

The relief rules provide a tax exemption for business assets in the event of inheritance or gift. Depending on the variant, 85 percent or even 100 percent of the qualifying assets remain tax-free, provided certain conditions are met. These include, above all, holding the company for a retention period and maintaining a minimum payroll level, intended to preserve employment in the business. The requirements are considerably stricter for the full exemption than for the standard relief. Eligibility and the extent of relief also depend on the composition of the transferred assets.

Standard relief of 85 percent generally requires a five-year holding period. Optional relief of 100 percent requires seven years. Payroll requirements depend in part on employee numbers. Assets mainly held for investment may be classified as administrative assets and restrict the relief. Exceptions and specific calculation rules apply, so one rental property or a high cash balance alone does not provide a complete assessment. Large transfers are subject to additional rules that may reduce relief or require an assessment of the recipient’s need for relief.

For business succession, relief is primarily a liquidity issue: a lower tax burden can prevent the successor from having to withdraw funds from the business or sell shares. At the same time, it may restrict the successor’s freedom of action for several years. A sale, cessation of business or other disqualifying action during the holding period can cause relief to be withdrawn wholly or partly with retroactive effect. Succession and sale plans should therefore be assessed together. In practice, the review covers the asset mix at the transfer date, employee and payroll developments, and planned distributions or restructurings. The key questions are the expected overall burden and whether the conditions remain achievable if business performance weakens.

Note: This explanation is for general information only and does not constitute tax advice. Tax treatment depends on the individual case and may change with new legislation. For a binding assessment, please consult a qualified tax adviser.