Guidance on dividend participation exemption updated

Revenue has published updated guidance on the participation exemption for certain foreign distributions to reflect amendments contained in Finance Act 2025. Information on distributions‑in‑specie and how the tax deductibility of a distribution impacts the exemption claim are also included in the guidance.

In general, for the purposes of the exemption, a relevant distribution does not include a distribution, or part of a distribution, that has been, or may be, deducted for tax purposes in any territory outside the State under the law of that territory. The guidance confirms that, from 1 January 2026, a distribution will not be excluded from being a relevant distribution solely because it is deductible for the purposes of a tax comparable to the close company surcharge in section 440 TCA 1997.

Section three of the guidance, which outlines the conditions the foreign dividend-paying company must meet to qualify as a relevant subsidiary, has been updated to include the following information:

• Relevant distributions made on or after 1 January 2026 by a company resident in a non-EEA or non-tax treaty territory are in scope of the exemption if foreign withholding tax at a nominal rate greater than zero per cent is paid on the full amount of the distribution and not refunded.

• The definitions of “relevant period” and “reference period” are reduced from five years to three years, reducing the period in which a company must be resident in a relevant territory, or have not had certain excluded merger and acquisition activity, prior to making a distribution.

• In cases where the domestic law of a relevant territory does not determine a company’s residence, the residence position will be determined under the terms of the relevant territory’s tax treaty with Ireland.

• A company resident in a territory with which Ireland has a newly signed tax treaty is eligible to qualify as a relevant subsidiary from the date of signature of that tax treaty.

• In the case of a relevant distribution made on or after 1 January 2025, a distributing company is permitted, during the reference period, to have acquired a business or business assets consisting of shares, or to have moved residence from Ireland, or to have had merger and acquisition activity involving an Irish resident company.