Essential to ensure succession in family-run SMEs
“Ensuring succession in firms by means of fair inheritance tax legislation will remain absolutely essential for small and medium-sized family businesses in the automotive industry and for their employees,” stressed Matthias Wissmann, President of the German Association of the Automotive Industry (VDA). He drew attention to the Federal Constitutional Court hearing on inheritance tax, which takes place today.
He added that this resulted from the special status of these businesses as guarantors of productivity and jobs: “Safeguarding jobs and securing the existence of family firms that have grown over decades are major factors requiring consideration when it comes to taxing business assets. Ensuring that someone will take over the company is therefore also in the general economic interest and justifies very different treatment from other types of assets, such as capital income or property,” Wissmann underlined.
“In addition, family businesses are generally overvalued for inheritance tax purposes. The present valuation regulations do not produce realistic results, but instead massively inflate the inheritance tax base, which requires compensation under special rules,” Wissmann said. Inheritance tax is a non-earnings tax determined not by current income or current earnings, but existing, often non-fungible assets.
In particular the special regulations governing family businesses – such as only medium or long-term access to the assets – were not taken into account under current valuation law, Wissmann explained. Another problem was that the special features of businesses – safeguarding skilled employment, major social obligations, and non-fungible assets – could not be sufficiently reflected in the market prices. Wissmann stated, “An excessive tax burden on companies must therefore continue to be avoided.”