2nd Feedback Statement published on Participation Exemption
2nd Feedback Statement published on Participation Exemption
On 27 August, the Minister for Finance, Jack Chambers TD, published a second feedback statement on the development of a participation exemption for foreign dividends to the Irish corporate tax system. Please comment on the feedback statement.
In my article in the April edition of Irish Tax Monitor, I covered in detail the first feedback statement published on the participation exemption for foreign dividends, including the background to same. So in the interest of brevity, I won’t go over old ground and focus solely on the second feedback statement published in late August.
The first thing to say is the period provided for responses was particularly short – just 7 working days! However, to the fair, with the Budget looming on 1 October, and the Finance Bill set to be published on 10 October, time was not on the Department of Finance’s side and thus the need for a short consultation period.
The second feedback statement follows review of the 20 responses received to the first feedback statement, and stakeholder engagement via a sub-group convened from the Department’s Business Tax Stakeholder Forum, which met on three occasions. The second feedback statement contains potential draft approaches to key elements of the legislation as well as information on some consequential amendment that may be introduced in conjunction with the participation exemption for foreign dividends.
The key elements of the draft legislation worth noting are:
Furthermore, the Feedback Statement also lists certain other provisions in Irish tax law which although they may interact with the participation exemption for foreign dividends, may not necessitate legislative amendments, including Schedule 24.
Responses to the second Feedback Statement will inform final decisions on the structure of the participation exemption for foreign dividends planned for introduction in Finance Bill 2024. The deadline for responses was 12 noon Thursday 5 September.
In my article in the April edition of Irish Tax Monitor, I covered in detail the first feedback statement published on the participation exemption for foreign dividends, including the background to same. So in the interest of brevity, I won’t go over old ground and focus solely on the second feedback statement published in late August.
The first thing to say is the period provided for responses was particularly short – just 7 working days! However, to the fair, with the Budget looming on 1 October, and the Finance Bill set to be published on 10 October, time was not on the Department of Finance’s side and thus the need for a short consultation period.
The second feedback statement follows review of the 20 responses received to the first feedback statement, and stakeholder engagement via a sub-group convened from the Department’s Business Tax Stakeholder Forum, which met on three occasions. The second feedback statement contains potential draft approaches to key elements of the legislation as well as information on some consequential amendment that may be introduced in conjunction with the participation exemption for foreign dividends.
The key elements of the draft legislation worth noting are:
- The new participation exemption would apply to distributions made on or after 1 January 2025 from subsidiaries which are tax resident in EU/EEA and DTA countries.
- Foreign dividends outside of the scope of the exemption (or which have not been opted into the exemption) would be able to avail of double tax relief under the existing Schedule 24 provisions.
- Companies may opt on an annual basis whether or not to claim the participation exemption. However, where a company opts-in the exemption applies to all qualifying foreign dividends arising in the period.
- To qualify for exemption the parent company must own at least 5% of the ordinary share capital of the subsidiary, be beneficially entitled to not less than 5% of profits available for distribution, and not less than 5% of assets of the subsidiary on a winding up.
- Dividends received by life assurance companies, investment undertakings and section 110 companies would not be eligible for exemption.
Furthermore, the Feedback Statement also lists certain other provisions in Irish tax law which although they may interact with the participation exemption for foreign dividends, may not necessitate legislative amendments, including Schedule 24.
Responses to the second Feedback Statement will inform final decisions on the structure of the participation exemption for foreign dividends planned for introduction in Finance Bill 2024. The deadline for responses was 12 noon Thursday 5 September.