On the occasion of our article "Critical Transfer of Family Businesses to the Next Generation" (Sunday, October 30, 2017), we have received many questions from ASnetwork on the issue of parental gifts of stocks and especially how to reduce the tax.
It should be clarified that for transfers by natural persons of shares of unlisted companies for consideration (e.g. sale), the goodwill for tax purposes is now calculated differently than for inheritance, donation or parental benefit.
From 1 January 2014 (pursuant to article 42 of Law 4172/13) for the transfer of unlisted shares for consideration, goodwill is the difference between the selling price and the acquisition cost.
The sale price is the highest between the value of the company's equity and the price stated in the transfer agreement and the acquisition cost is considered to be the lowest of the value of the company's equity at the time of acquisition of the securities and the price in the contract for the purchase of the securities.
However, in cases where unquoted shares are acquired as a result of inheritance, donation or parental benefit, the value of the shares is valued on the basis of a "formula" which takes into account the return on equity of the company for the past five years prior to the transfer.
Reimbursement of these funds adds to the company's own funds existing on the day before the tax obligation arises (e.g. parental benefit).
This result is added to any positive difference between the fair value and the value of the property in the records of the company whose shares are transferred and subject to inheritance or donation or parental benefit tax, in accordance with the tables of Law 2961/2001.
The abovementioned tax is reduced in cases where the parental benefit is provided only by the simple ownership of the shares by retention of usufruct, depending on the age of the user.
This way of "partial transfer" of the company, apart from the reduced tax, means that:
- Unless otherwise specified, the principal owner has the right to participate in the General Meetings of the Company, exercising the right to vote.
- The beneficiary of the dividend is the principal owner.
In the case of a share capital increase, the power to exercise the pre-emption right (participation in the increase of the share capital) belongs exclusively to the minor shareholder.
The transfer of securities (shares) as a cause of parental benefit is taxed according to article 29 of Law 2961/2001 "Code of Heritage - Grants - Parental Benefits" based on the scale applied for category A, which includes the parent-child relationship and has a tax-free limit for the first 150,000 euros, 1% tax for the next 150,000 euros, 5% for the next 300,000 euros and 10% for the excess value.
It should be noted, however, that for the purpose of calculating the tax, the parent's parental benefits to the child are taken into account and if the value of the parent exceeds EUR 600 000, then the taxable value of the shares of the company to be transferred is taxable at a rate 10%.
Pursuant to the provisions of articles 40, 15 and 16 of Law 2961/2001, in the case of the parental provision of the mixed property by deduction of the usufruct of the shares of a S. A. by the parent to a child, the tax liability is born at the time of the death of the user (parent), in which case the affiliation of the usufruct with the minor ownership occurs and the tax is calculated on the value of the full ownership.
However, if he so desires, the person with bare ownership (child) will have to make an explicit statement to the head of the competent tax authority asking for the immediate taxation of the bare ownership at the time of filing the statement of parental benefit.
In this case, taxing time is the time of submission of the relevant statetement, so that the tax liability of the beneficiary (child) is exhausted without any further obligation to tax full ownership at the time of death.
The value of usufruct and bare ownership is determined as a percentage of the value of the full ownership depending on the age of the user, e.g. if the user is 71-80 years old, the usufruct value is estimated at 2/10 of the total ownership and therefore the value of the common ownership is 8/10 of the full ownership.
In simple terms, in this case the tax will be 8% (if the value of the shares exceeds 600,000 euros), while it will be 7% if the owner is between 61-70 years old and so on.
G. Samothrakis, J. Panou
Posted on Sunday newspaper "KATHIMERINI", on 18/03/2018