Family owned businesses help drive local, national and global economies, accounting for most of the country’s employment. Over 5 million family businesses exist in the UK, generating over almost a third of country’s GDP.

But transferring a family business from one generation to the next can be financially challenging. Tax implications can vary widely depending on where the business is located. Some countries offer substantial tax breaks to help family businesses succeed and grow in the hands of the next generation, while other countries tax transfers within families in the same way as any other transaction, creating significant costs. Another great challenge is what happens to the family business when the head of the business passes away or decides to retire. It has always been a burning question for the aging baby boomer generation of business owners and has become even more urgent with the impact of COVID-19.

Global family business tax monitor 2020

KPMG Private Enterprise’s Global family business tax monitor 2020 examines the differences in tax implications across 54 countries, regions and jurisdictions and how they can influence the successful transition of family businesses from one generation to the next. The report also features insights into global trends that are expected to alter the tax landscape for family business transfers in the coming years, along with key succession planning points that business families should consider in the light of the COVID-19 pandemic.

Key highlights from the 2020 Global Family Business Tax Monitor report:

  • Taxes on transfer of a family business tend to be higher, with complex exemption requirements, in larger, developed economies; but families in emerging economies can face a challenging tax burden as well.
  • Of the 54 countries and territories surveyed, 15 have an inheritance/wealth tax that applies for the intra-family transfer of a EUR10 million family business, 16 have a gift tax that would apply for a lifetime transfer.
  • The US has one of the highest tax rates globally for transfer of a EUR10 million family business, by gift or inheritance, before exemptions.  However, US families potentially benefit from a US$10 million (indexed for inflation) exemption, currently scheduled to sunset after 2025.
  • France, Ireland, the Netherlands, Spain and the UK have the highest tax rates of countries surveyed in Europe for transfer of a EUR10 million family business at death, before exemptions, but taxes are reduced substantially by exemptions.
  • In Asia-Pacific, South Korea stands out for having one of the highest tax burdens in the world for the transfer of a family business. By contrast, China currently does not impose any gift or inheritance tax.

 

Download the KPMG Private Enterprise Global family business tax monitor report to gain an in-depth perspective on the changing tax environment for family business around the world.