Whether you are a seller or a buyer, the business transfer cannot be improvised (Photo : ING)

Whether you are a seller or a buyer, the business transfer cannot be improvised (Photo : ING)

Whether you are a seller or a buyer, the business transfer cannot be improvised. The process of taking over a business can take several months or even years from the time you think about taking over a business to the time you become the manager of the company. Similarly, selling your business is an important process that will take many years to complete. So how to be well prepared? Is there an organization that can help you with your project? And what are the tax implications?

The importance of being well prepared

To maximize the chances of a successful business transfer, don’t forget to follow the golden rules: take your time, tell relatives about your project and be clear with what you want to do and what you don’t want to do. Don’t leave out any steps: the valuation of the company, the negotiation, the legal and tax aspects, the transition period. Also consider the emotional aspect. If you are the seller, you will probably feel that you are concluding with a part of your life, especially if you are the one who founded the business and developed it. It is therefore essential that you take a step back. If you are the buyer, you will have to dispassionately deal with the seller by using certain legal documents such as the letter of intent, the memorandum of understanding, the exclusivity or the confidentiality agreement.   

The national platform for business transfers

To ensure a successful takeover, the House of Entrepreneurship of the Chamber of Commerce and the Chamber of Trade, in partnership with the Ministry of Economy, launched a national platform for business transfer () in 2021. It aims to bring together all offers for the transfer and takeover of all businesses established in Luxembourg. More specifically, you benefit from a connection procedure via a matching service and the possibility of posting or viewing announcements. As a transferee or transferor, you can publish an announcement on the common platform via a form and choose three levels of visibility depending on the level of anonymity you want.

Also, the Business Transfer team of the Chamber of Commerce and the Chamber of Trade can accompany you throughout the process stages. The support service analyses the feasibility of your project in light of the elements you communicate and defines the key steps and measures with you that must be accomplished to formalize your project. You can also participate in two-hour awareness-raising workshops. In addition, the House of Entrepreneurship and the House of Training of the Chamber of Commerce organize a training cycle to help you better prepare for taking over a business. It comprises two cycles of four sessions (in the evening): the fundamentals and the practical application. More information about the training cycle . 

The access to these services is entirely free and open to sellers, buyers and intermediaries acting on behalf of a seller or buyer.  

The tax implications

 They will differ depending on whether you are the buyer or the seller or whether it is the goodwill of an existing business or equities or shares in a capital company or a partnership.

From a tax standpoint, goodwill refers solely to the difference between the purchase price of the business and the sum of the costs of acquiring the various items on the balance sheet. If you acquire all the goodwill in its entirety, you are VAT-exempted. The Luxembourg Inland Revenue (ACD) considers that you continue the existing business activity and take over the rights and obligations of the business in terms of VAT. However, certain goodwill items such as the transfer of lease agreement may be subject to pro-rata registration fees. If you only buy a part of the goodwill, you may be liable for VAT on the purchase price of only certain items (e.g. lease rights). If you are the seller, you are taxable on any capital gain made on the sale.  

You are not taxed if you purchase equities or shares in a capital company (SA, SARL, SECA, SENC or SCS). There are no capital gains. The change of shareholders has no impact on the company's activity, its balance sheets, contracts and tax obligations. If you are the seller, you are subject to tax on any capital gain made on the sale.

If you buy equities or shares in a partnership, the company’s assets are transferred to you. In this case, the transaction is treated as a purchase of goodwill. Therefore, it may result in the payment of VAT or registration fees.

To find out more about the transfer or sale of a company, do not hesitate to consult experts in any field related to the transfer of a business. For example, for the financial aspect, do not hesitate to call your banker, especially if you are a prospective buyer and are looking to finance your project.

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