The tax regime of the family business, when it is not a partnership. Although it is usually analyzed in relation to partnerships. The tax regime of the family business also has a very important role in the activity of those family businesses that are not exercised through a company. But are managed directly by the entrepreneur or professional as a self-employed, in a personal capacity. Since these entrepreneurs are also affected by the more and more probable modifications in the regulations of the Wealth Tax and the Inheritance and Gift Tax. Modifications that can put in difficulties the continuity of the business within the family.
Our Tax Consulting experts, analyze this interesting possibility for the Self-Employed.
The tax regime of the family business. Self-employed and professionals
Being able to label the activity of the self-employed within the range of application of the family business regime will allow access to the following tax benefits:
- Exemption in the Wealth Tax. Avoiding having to pay tax on the ownership of the goods and rights necessary for the exercise of the activity of the self-employed.
- Allowance of 95% of the base for the heir or donee in the Inheritance and Donations Tax. Allowing the succession between generations in the family activity without a high fiscal cost for the new generation.
- Exemption in IRPF of the patrimonial gain for the donor. In case of donation of the goods and rights necessary for the exercise of the activity to the next generation of the family.
Requirements
In order for the activity of the self-employed to qualify as a family business for the purposes of applying the tax regime, thus applying the exemption in Wealth Tax, it will be necessary:
- That it is carried on habitually, personally and directly by the self-employed person who owns it and constitutes his main source of income. This requirement is especially relevant. Since the regulations foresee scenarios that make it possible to make the application of the family business regime compatible with the activity as a self-employed person. With the application of the same to family companies in which the self-employed person participates and from which he/she obtains remuneration. Making adequate planning even more important. That allows to extend to the maximum possible the range of the exemption in the patrimony of the entrepreneur.
- In addition, it is very relevant to point out that the exemption reaches the assets and rights necessary for the exercise of the activity as self-employed. And this even if its ownership is shared with the spouse. Therefore, the planning for the fulfillment of the requirements of the regime can be a benefit not only for the self-employed. But also for the spouse. Further reducing the tax burden associated with the ownership of the activity.
Benefits
The fulfillment of these requirements will also allow to plan fiscally the future succession in the family business. If the above requirements are met, in the event of inheritance, the heirs will enjoy:
- A 95% reduction in the taxable base of the Inheritance Tax.
- While in case of donation of the activity to the new generations of the family. The same would not generate fiscal impact in the IRPF of the donor. And it would benefit in the Donations Tax of the reduction of 95% of the base for the donees.
But the latter will occur, provided that two additional requirements are met:
- That the donor is 65 years of age or older. Or that he/she is younger but is in a situation of permanent disability, in degree of absolute or great disability.
- If the donor has been performing management functions, he/she should cease to do so.
As in the case of inheritance or donation of shares or participations in companies under the family business regime. The heirs must keep what they have received for a period of 10 years. Although in Madrid the term is 5 years in case of inheritance. They must continue to comply with the requirements of the regime during that time. And without their decisions being oriented to substantially reduce the value of what was acquired in inheritance or donation.
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