Revenue has published new guidance on the participation exemption for certain foreign distributions which was introduced by Finance Act 2024. The participation exemption applies where a relevant subsidiary makes a relevant distribution on or after 1 January 2025 to a parent company of the relevant subsidiary. The conditions which the parent company must satisfy to claim the exemption, including the required qualifying participation in a relevant subsidiary, are detailed in the guidance.
The qualification requirements for a relevant subsidiary are also outlined. A qualifying distribution must be recognised as income in the hands of the recipient for the purposes of corporation tax and it must be made out of the profits or the assets of the relevant subsidiary.
The exemption is supplemental to the existing “tax plus credit” approach. Companies must elect to claim the exemption with all qualifying distributions, in that accounting period, being exempt if an election is made. A claim for the exemption cannot be made on a per dividend/distribution or per subsidiary basis.
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