Flemish Government to Tighten Tax Rules on Family Business Transfers
KORTRIJK – The Flemish government is moving to revise tax benefits currently available for the donation and inheritance of family businesses, potentially ending a broadly applied favorable regime as early as January 1st. While the proposed decree still requires parliamentary approval,passage is widely anticipated. the information comes from a recent press release issued by consultancy firm SBB Accountants and Advisors.
Currently, the transfer of shares in qualifying family businesses benefits from reduced tax rates. inheritances are subject to a 3% rate for direct descendants and spouses, and 7% for other relatives, provided the business demonstrates a genuine family character and substantial economic activity. These lower rates are designed to encourage the continuation of Flemish businesses and protect employment.
However, SBB points out that the interpretation of these conditions has been expansive. The current rules have,in practice,extended benefits to family businesses holding important private real estate assets,such as holiday homes.
This broad interpretation has been the subject of legal challenge. Until 2023, the Flemish Tax Authorities (Vlabel) generally excluded real estate not directly used for business operations from the favorable treatment. A recent court ruling overturned this stance, requiring Vlabel to grant benefits as long as the business could demonstrate overall economic activity.A key limitation remains: if real estate constitutes more than 50% of the company’s total assets, the favorable regime no longer applies.
The government’s proposed changes aim to curtail these benefits for real estate holdings. Specifically, residential properties – including private homes and building land – owned by the family business will be excluded from the favorable tax regime, even if held within the company structure.
To ensure compliance, taxpayers will now be required to submit a valuation report prepared by a registered company auditor or certified accountant, detailing the proportion of residential real estate within the overall business valuation. SBB advises those considering transferring ownership to proactively request a certificate from Vlabel confirming eligibility under the current rules. These certificates are now being expanded to include the auditor/accountant’s valuation report, streamlining the subsequent Vlabel assessment process.
The potential for a rush to transfer shares before the end of the year remains to be seen, as SBB indicates the revised rules are expected to take effect from January 1st.
