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Global Family Business Tax Monitor

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Global Family Business Tax Monitor Global family business tax monitor Plan for the future — Comparing the impact of tax regimes on family business May 2018 kpmg.com/familybusinesstaxmonitor Foreword A thriving family business sector contributes to a vibrant economy. Tax-efficient transfers between generations leave wealth in the hands of entrepreneurial families to invest in profit-producing activities — and that can help stimulate job creation and innovation across generations.” Jonathan Lavender Co-chair KPMG Enterprise Family Business & Global Chairman, KPMG Enterprise © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. For business families around the Increasingly, governments are looking world, KPMG Enterprise’s global beyond their borders, cooperating family business tax monitor delivers to share best practices, and working information and insights on the taxes to ensure their tax systems operate and reliefs available when transferring efficiently and interact appropriately the family business to the next with those of other countries. generation, both on retirement and The same trend is not as prevalent through inheritance. Since the first where the taxation of family business edition in 2014, covering 23 European transfers is concerned. As the case countries, the monitor has now grown studies in this report show, there to span 65 countries, regions and are significant disparities between jurisdictions. regimes on whether: In this edition, KPMG Enterprise and — the donor or recipient is subject KPMG International member firms to tax in each jurisdiction that was covered provided a snapshot of the domestic — a specific tax relief is available tax rules governing family business and what conditions must be transfers (details can be found in the met to gain that tax relief country summary notes at the end — taxes are applied on inheritances of this report). KPMG Enterprise and and family gifts directly, or KPMG International advisers from through other taxes and charges member firms also provided their such as capital gains taxes and detailed analysis of the outcomes of stamp duties. two case studies: one in which a family business is transferred on the owner’s This report also aims to provide an death, and a second in which the understanding of the tax differences transfer happens during the owner’s and their varying impacts on the lifetime. smooth, successful transition of family businesses from one generation to The variations among regimes the next. There are also insights into across the globe are striking — and trends that are expected to alter the tax somewhat surprising in view of landscape for family business transfers the general global trend toward tax in the years to come. Finally, you will rule harmonization. Since the first find key succession planning points tax monitor was published, the that business families should consider, globalization of tax has accelerated regardless of where in the world they and tax rules have started showing are located. signs of converging, especially for value-added taxes and the taxation We trust that business families will find of transactions across borders. this report useful while preparing for the future of your family enterprise. Jonathan Lavender Greg Limb Co-chair KPMG Enterprise Head, International Private Wealth Family Business & KPMG Enterprise in the UK Global Chairman, KPMG Enterprise Tom McGinness Olaf Leurs Co-chair KPMG Enterprise Head of KPMG Enterprise Family Business, EMA & Family Business, Partner Meijburg & Co KPMG Enterprise in the UK KPMG in the Netherlands © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. As always, business families should ensure the succession goals of all family members are understood and respected. Where the younger generation wishes to redirect some of the family’s capital to make investments with social impact, alternative (often) tax-efficient structures such as charitable foundations could be considered to achieve these ends.” Tom McGinness Co-chair, KPMG Enterprise Family Business Partner, KPMG Enterprise in the UK © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. contentsTable of Foreword 2 What’s new? 6 At a glance: recent changes and potential developments 6 Behind the numbers 8 Culture underpins tax policy choices 9 Granting tax preferences — with strings attached 13 Case studies 14 Case study 1: Family business transfer through inheritance 16 Case study 2: Family business transfer on retirement 20 Case study highlights and takeaways 24 Future outlook: five key developments 28 1. US tax reform will have high impact for (at least) the short term 29 2. Brexit’s impact is uncertain 30 3. Governments are addressing the informal economy 30 4. Business owners are living longer 32 5. Millennials have different aspirations and values 33 It is never too early to start planning 34 The final analysis 35 Contacts 36 Country/region/ jurisdiction summary notes 42 © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Family businesses in Belgium should review existing plans with a view to taking advantage of the new flexibility that will soon be allowed in their succession options, but at the same time, take into account the revised What’s position of the tax authorities regarding gifts.” new? Tom Zwaenepoel At a glance: recent changes and Partner, KPMG in Belgium potential developments Malta introduced a temporary tax incentive to encourage family business transfers to the next The United States’ generation. The relief reduced (to The United Kingdom’s inheritance tax has not tax reform legislation France is considering 1.5 percent) the duty charged on changed substantially in 34 years. The UK’s Office of Tax increased the lifetime simplifying the conditions for the transfer of family business Simplification is reviewing the inheritance tax system to exemption amount to accessing its exemptions for shares to the owners’ make tax filings, payments and other compliance simpler.5 USD11.18 million (for 2018; family businesses transferred1 descendants between 1 April 2017 More broadly, the review is to look at how the UK’s indexed for inflation). The on death or gift. and 30 September 2018. inheritance and gift taxes interact and whether the current change became effective for framework distorts business transfer decisions. transfers of assets occurring in tax years beginning after 31 December 2017 but expires 31 December 2025. In India, the possibility that the A South Africa government government may introduce estate As discussed later in this commission is looking into report, the reform allows duty or adopt a form of inheritance introducing a wealth tax,4 but its tax2 has led several larger family owners to transfer more enactment is uncertain in view of the Thailand introduced a new assets tax-free on death or businesses to consider the use of country’s already onerous capital inheritance tax in August 2016. To curb Belgium is updating trust structures. through lifetime gifts, greatly gains tax and estate duty provisions. potential avoidance of the new tax, the its inheritance laws for the expanding the succession country also added gift tax provisions to first time since they were options of business families. its personal income tax regime. laid down by Napoleon over 200 years ago. While tax rules are not affected, Israel’s government faces public Philippines introduced changes taking effect in pressure to eliminate its tax a tax reform effective from September 2018 will ease exemption for gifts and to impose an 1 January 2018 that simplifies 3 Taiwan’s existing legal requirements inheritance tax. While no changes taxes on donation and inheritance and gift and restrictions. are scheduled, business owners may succession by replacing be advised to make gifts to relatives graduated tax rates for tax changed from a and take advantage of the gift tax lifetime gifts to family flat 10 percent rate to exemption while it is available. members and estate tax with progressive rates of a flat donor’s/estate tax rate 10–20 percent as of of 6 percent. 12 May 2017. 1 “La loi Le Maire pourrait comprendre une reforme des pactes Dutreil-transmission,” L’Agefi, 25 January 2018 http://www.agefi.fr/corporate/actualites/quotidien/20180125/loi-maire-pourrait-comprendre-reforme-pactes-238174. 2 See, for example, “Inheritance tax may be reintroduced in India”, Financial Express, 9 October 2017. 3 See, for example, “Threatened with Estate Tax, Israel’s Rich are Taking Precautions”, Haaretz, 27 March 2015. 6 | Global family business tax monitor © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Family businesses in Belgium should review existing plans with a view to taking advantage of the new flexibility that will soon be allowed in their succession options, but at the same time, take into account the revised position of the tax authorities
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