Spanish Family Business Inheritance: The mistake can be very costly

What are the requirements for the application of the famous 95% tax rebate?

The succession of a family business can be a complex process which is, undoubtedly, full of ins and outs; I will try to solve one of them in this article.

Being a business family means much more than owning a partnership. It is essential for these families to plan their succession, avoiding mistakes due to lack of awareness or confusion.

| As highlighted in the report "Family Business in Spain (2015)" by the Family Business Institute, 88.8% of Spanish companies are family business and particularly in Catalonia the percentage reaches 85.6% % |

It is an issue that affects all business families. After twenty years of experience, I can say that most of the conflicts arise due to lack of planning. All business families should implement a strategy for planning a generational change or a succession.

| It is not necessary to be a partner of the family firm in order to apply the 95% tax rebate |

The classic case is the transfer of the family firm to the widow and the respective children. 

Due to the existence of a family bond, tax benefits stipulated by law will applied. But the most common confusion is to think that it is necessary to be both, a family member and a partner of the company to apply the bonus. However, this is not the case.

It is only necessary to be a manager and a relative. In this case, a 95% bonus may be applied to the taxable amount of the Inheritance Tax. Thus, the family member who inherits the company does not have to be the owner of equity interests of the family firm.

Financial and tax issues must be dealt together in order to build a consistent fair planning. During that process, I always support the families in all conflicts that usually arise due to miscommunication.