1 February 2023
A Baby BV is a tax structure where parents set up a limited liability company. Upon incorporation of the Baby BV, their minor children are issued with shares.
Questions were recently raised in the Second Chamber about this structure. What impact will this have on the Baby BV? Will the Baby BV evolve? I will gladly tell you more about it.
The parents subsequently perform work for the company. The intention is that the shares in the BV increase in value as a result of the work performed by the parents for the BV. This increase in value will then accrue to the children who own the shares. The parents perform work for wages.
The effect of this construction is that there is no gift tax. After all, the benefits did not belong to the parents at the incorporation of the BV and never belonged to the parents. The parents will therefore not be impoverished in this process. Impoverished means that the parents will actually have fewer assets, and this is not the case. If these future benefits did not belong to the parents at the incorporation of the BV, then there is no impoverishment of the parents and therefore no tax gift.
Questions were recently raised in the Second Chamber about this structure. These questions stem from the IBO report Wealth Distribution presented to the Second Chamber on 8 July 2022. The report draws attention to the fact that several websites recommend this structure as an option to avoid inheritance and gift tax. As the report identified the baby BV as a ‘conspicuous tax structure’, the Second Chamber felt that the State Secretary should answer questions about this. The State Secretary replied that the desirability of the structure will be addressed shortly in the IBO report. It will therefore be followed-up.
If you have any questions about the baby BV with respect to inheritance law, please do not hesitate to contact us. Our lawyers specialising in inheritance law will be happy to assist you.
