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Written by:
Bas Hollenberg


BSF discriminatory

According to Advocate General (AG) IJzerman the distinction between gift and inheritance tax of private equity and venture capital in the Inheritance Tax Act is in violation of the internationally accepted principal of equality. The AG came to this conclusion after five test cases.

There is an exemption under current law, known as the business succession facility (or BSF), of 100% of the value of venture capital received up to € 1,006,000 and 83% of the value in excess of that amount. Only those who inherit the venture capital or receive it as a gift are entitled to the exemption. The exemption has been extended in recent years: from 25% to 30% in 2002, to 60% in 2005, to 75% in 2006 and to the current rates as of 1 January 2010.

According to the AG an exemption of 75% for venture capital means that there is an objective and reasonable justification for the unequal treatment of acquirers of private equity and venture capital. The avoidance of liquidity problems was the justification for the exemption as established by the legislator.

In raising the exemption to more than 75% on 1 January 2010 there is no longer any such justification, according to the AG. He also considered the fact that the Council of State had warned the legislator that any further extension of the exemption could impinge the principle of equality. The legislator has not yet done any investigation into the necessity and effectiveness of the further extension despite the warning.

The AG recommended that the Supreme Court offer to acquirers of private equity restitution and also an exemption to the extent that the legal exemption the BSF provides exceeds 75%. That means that acquirers of private equity are entitled to an exemption of (100% – 75%) 25% over the first € 1,006,000 and (83% – 75%) 8% over the remainder. This advice deviates from the ruling of the Court of Breda. They ruled that acquirers of private equity are entitled to the complete exemption of the BSF.


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