Goodwill in Business Transfer: What Is It and How Does It Work?

What makes up goodwill?

• Customer relationships: recurring clients, long-term contracts, retention rates
• Brand value: reputation, market position, online presence
• Processes and systems: scalable operations, trained team, proprietary technology
• Location: strategic location for retail or logistics businesses
• Licences and permits: hard-to-obtain regulatory approvals

How is goodwill valued?

The most common method: EBITDA multiples. The multiple applied depends on sector, stability and growth. Goodwill = (sale price) minus (net asset value). For example: a business with €200,000 EBITDA sold for €700,000 (3.5x) with net assets of €150,000 has goodwill of €550,000.

Tax treatment of goodwill

In a share sale: the entire sale price (including goodwill) is part of the capital gain taxed in box 2 (if selling personally) or exempt under the participation exemption (if selling via holding).

In an asset sale: goodwill received by the selling company is taxed at corporate tax rates (19%/25.8%). The buyer can then amortise the purchased goodwill over 10 years for tax purposes.

The neighbouring questions

Three pages sit directly alongside this one: Selling a Business via a BV, Selling Your Business and Transferring a Business to Your Child.