Money Buzz! Europa

Tag: Family business

  • Family businesses are optimistic about their recovery by 2022

    Family businesses are optimistic about their recovery by 2022

    Family businesses are optimistic about their recovery over the next two years, with 86% anticipating a return to pre-pandemic growth rates by 2022, says PwC.

    The estimates are encouraging as, given the health crisis, only 28% of respondents estimated sales increases for 2020, with 46% estimating decreases.

    The impact of COVID-19 on sales is uneven across sectors

    Of those in hospitality and leisure, 84%, the highest proportion of any sector, expect a contraction, followed by 64% in automotive and 63% in entertainment and media.

    Regarding the measures taken during the pandemic, 80% of family businesses have enabled home working for employees and 25% have repurposed production to meet pandemic-related demand.

    Only a third of family businesses have had to cut dividends and only 20% have needed access to additional capital. 

    Looking to the future, 80% of family businesses plan to diversify or expand into new products or markets.

    Digital transformation has been delayed

    Although 80% of respondents say that initiatives related to digitalisation, innovation and technology are a top priority, progress in those areas has been slow.

    Only 19% say that their digital journey is complete, with 62% believing that they have a long way to go.

    Of businesses that report having digitalised their operations, 41% are in their third or fourth generation of managing the family business.

    Top priorities for the next two years include expanding into new markets / customer segments (55%), improving digital capabilities (52%), launching new products / services (50%), increasing the use of new technologies (49%) and rethinking the business model (39%).

  • What are the taxes for transferring a family business between generations

    What are the taxes for transferring a family business between generations

    A new report, KPMG Private Enterprise Global Family Business Tax Monitor, compares tax implications for transferring a family business across 54 countries and territories.

    The survey shows that for a transfer of a family business valued at EUR 10 million, out of 54 countries surveyed, 14 have a specific inheritance tax that applies (15, if we also count the US that applies a wealth tax for family business inheritance), while 16 have a gift tax that would apply to lifetime transfers of the business.

    Of the 10 countries with the largest GDPs in the survey, six (Brazil, Canada, France, Germany, US, UK) have taxes that apply both for inheritance and lifetime transfers, while four (China, India, Italy and Russia) have neither gift nor inheritance tax on transfer of a family business. 

    Other taxes, such as capital gains tax and personal income tax, are applied in some jurisdictions as well.

    In Romania, according to the current tax legislation, there are no taxes on inheritance or gifts when passing the family business to the next generation. (Some taxes may apply for real estate transfers, which are not part of the business).

    While there are tax reliefs in most jurisdictions that can lessen the burden on families transferring their business, many of these are coming under increased scrutiny and families need to be prepared for change.

    For example, in the US, families transferring a business currently benefit from a gifts and estates exclusion of US$10 million, with an annual inflation adjustment (US$11.58 million for 2020) – the exclusion presently has effect until 2026, but there is the potential for the exclusion to be modified or eliminated.

    Similarly, families in the UK benefit from business property relief (BPR) in transferring a business, but there are proposals that could modify or remove this relief.