Argentina tax legislation does not provide for a participation exemption.

Dividends paid by a local entity to another local entity are exempt from income tax. Dividends are only taxed when distributed to a local individual or to a foreign entity or individual.

A Capital Gains Tax (CGT) exemption is available for the sale of an active foreign business by an Australian resident company.

Dividends received by resident corporate tax entities (eg, companies and corporate limited partnerships) that have a 10-percent or more equity interest in a foreign subsidiary are generally exempt from further Australian income tax.

However, these need to be addressed on a case-by-case basis.

Austrian dividends distributed to a resident company are exempt from corporate income tax under the national participation exemption rules (Beteiligungsertragsbefreiung). Foreign dividends distributed to a resident company are also exempt from corporate income tax. However, there are special provisions that differ between companies that are resident in an EU member state or in a state with which Austria signed an extensive tax administrative assistance agreement.

Dividend income received by a Belgian company is subject to corporate tax at the standard rate. The Belgian participation exemption regime, however, allows for a deduction of 100 percent of the received dividend amount if certain conditions are met.

Brazilian legislation does not provide for participation exemption. As a general rule, dividends received from other domestic legal entities are exempt. Note, however, that the Brazilian Government is studying possible changes to the rules regarding the payment exemption.

There is no general participation exemption for dividends or capital gains recognized on the stock of foreign subsidiaries. If certain ownership and source requirements are satisfied, a deduction may apply with respect to dividends received from certain domestic and foreign corporations.

Intercompany dividend distributions (between Chilean tax residents) are exempt of CIT at the level of the recipient. Foreign dividends paid to Chilean companies are subject to CIT with the possibility of using foreign taxes to offset CIT liability.

Dividends received by a resident enterprise from another resident enterprise are exempt from enterprise income tax, except for dividends paid by a publicly listed enterprise to a shareholder that has continuously held the shares for less than 12 months.

Colombia has a Colombian Holding Companies (CHC) regime for resident corporations. This regime establishes that:

• Foreign dividends and capital gains obtained by the CHC Holding are exempted from corporate income tax. The same treatment applies forDistribution of dividends by the CHC Holding to non-Colombian residents is not taxable in Colombia.

• Sale of shares in the CHC Holding by non-Colombian residents could be a non- taxable income. This benefit is limited if the CHC Holding performs activities in Colombia.

Participation exemption regarding dividends covers dividends from unlisted companies in Finland, from foreign companies covered by the EU parent subsidiary directive and from foreign companies pursuant to the applicable tax treaty. Dividends received from a listed company by a non-listed company are tax exempt only if holding is at least 10 percent.

Participation exemption additionally covers capital gains from a sale of shares in a company, but under strict criteria as follows:

• Shareholding at least 10 percent in the target company
• A holding period of at least 1 year
• Sold shares are part of fixed assets
• The target company is located in EU or a tax treaty country and
• The main purpose of the target company is not to hold real estate.

The participation exemption is not applicable to capital gain received by private equity companies.

A participation exemption regime is applicable to long-term capital gain (88-percent exempt) and dividends (as a rule, 95-percent exempt), subject to a minimum shareholding of 5 percent of the share capital and a minimum holding period of 2 years. A specific participation-exemption regime applies to dividends distributed within a tax consolidated group (99-percent exempt) as well as, under conditions, to distributions made by foreign companies based in the EU, Iceland, Norway or Liechtenstein. Capital gain on the disposal of shares of real estate companies is excluded from the participation exemption regime.

Dividends received by a corporate shareholder are generally tax-free for corporate income tax purposes for shareholdings of at least 10 percent and for trade tax purposes for shareholdings of at least 15 percent. Capital gains received by a corporate shareholder are generally tax-free for corporate income tax purposes and for trade tax purposes regardless of the amount of participation. An amount equal to 5 percent of the dividends or capital gain is treated as a non-deductible business expense and added to taxable income. In turn, the actual business expenses are fully deductible.

Under the current FSIE regime. the participation requirement provides an alternative to the economic substance requirement to determine whether a MNE entity could obtain tax exemption on foreign-sourced dividend or equity interest disposal gain received in Hong Kong with effect from January 1, 2023.

Capital gains realized through the disposal of stock in qualifying subsidiaries are exempted from corporate income tax. Participation exemption additionally applies to dividends received.

There is no participation exemption for dividends received from, or capital gain recognized on the stock of, foreign subsidiaries. However, the investor can claim a deduction only for the interest expense which is restricted to 20 percent of the gross dividend income.

A deduction toward dividend received by a domestic company from another domestic company, foreign company and business trusts is allowed in computation of its taxable income, subject to certain conditions. 

An exemption from corporate tax on chargeable gains applies to Irish resident companies on disposals of shareholdings in subsidiary companies, subject to the following conditions:

• The subsidiary must be resident in the EU or in a country which has signed a double-taxation treaty with Ireland.

• The disposing company must hold 5 percent of the ordinary share capital of the subsidiary for a minimum of 12 continuous months. The disposing company must also be entitled to 5 percent of the subsidiary’s distributable profits and 5 percent of the subsidiary’s assets on a winding-up for this 12 month period.

• The subsidiary must be a trading company or the disposing company, the subsidiary and all of the disposing company’s 5-percent subsidiaries must form a trading.

Ireland does not have a participation exemption for dividends. The tax treatment of dividends is discussed below.

Israeli corporations, which are entitled to the participation exemption regime, are entitled to a tax exemption on:

• Dividends received from a "qualified foreign subsidiary," if distributed during a period of not less than 12 consecutive months, during which the Israeli corporation was a significant shareholder of the subsidiary

• Capital gains derived from the sale of shares of such subsidiary
• Financial income derived from investment on Tel Aviv Stock Exchange (TASE) and
• Interest and linkage difference derived from a financial institution.

Dividends paid from a holding company to non-residents will be entitled to a reduced withholding tax rate of 5 percent. In practice, this regime is rarely in use.

Dividends received from domestic and foreign corporations are 95-percent excluded from the taxable basis, unless they are distributed by affiliates with a privileged tax treatment. The participation exemption on capital gain from the sale of participations applies when certain requirements are met, allowing an exemption of 95 percent of the capital gain.

Starting from 2024, the PEX regime would be applicable to companies and commercial entities not resident in Italy and without a permanent establishment therein, if 2 conditions are met:

• They are resident in a country located in the EU or in the EEA;
• They are subject to a corporate income tax in their State of residence.

Under Japanese tax law, there is no participation exemption for dividends received from, or capital gain recognized on the stock of, foreign subsidiaries. However, there is an exemption for dividends received from foreign subsidiaries (the so-called 95 percent foreign dividend exemption rule). Under this rule, if a Japanese shareholder has held 25 percent or more of the interest of a foreign company (the percentage could be lowered if a relevant tax treaty is applicable) for at least 6 months prior to the dividend determination date, 95 percent of dividends received from such foreign company, excluding the portion deductible in the foreign company's residing country, may be exempt from taxable income.

Dividends and gains derived by a Luxembourg entity from a qualifying participation (broadly any entity subject to a corporate income tax rate of at least 8.5 percent applied on a tax base determined by the application of rules similar to those existing in Luxembourg) may be tax exempt if certain conditions in terms of shareholdings are met.

The application of the participation exemption regime on capital gains is subject to a recapture rule under which capital gains will remain taxable up to the aggregate amount of expenses connected with the qualifying participation such as financing cost and write-downs, which have reduced the parent’s taxable base in prior years or in the year of disposal. 

There is no participation exemption for dividends received from, or capital gain recognized on, the stock of foreign subsidiaries.

Mexican companies that own shares of another Mexican entity may receive dividend distributions that should not be subject to further taxes, to the extent the dividends come from the net tax profit account (CUFIN).

Profits received from companies with head offices or effective management in Mozambique subject to and not exempt from IRPC or subject to the Special Tax on Gambling may be deducted in full from the results of the companies that are the beneficiary of the profits, provided that the following conditions are all met:

• They are commercial companies or civil companies incorporated under the commercial form, cooperatives and public companies;
• Have their head office or effective management in Mozambique; and
• Hold a percentage of the share capital of the company distributing the profits of at least 20 percent and during the 2 previous years prior to the date on which the profits are placed at the disposal or, if held for a shorter period, if the shareholding is maintained during the time necessary to complete that period.

This deduction mechanism is also applied, irrespective of the percentage of shareholding and period during which the shares are held, to the following companies:

• Insurance and mutual insurance companies, with respect to income from shareholding in which technical reserves had been applied;
• Risk capital companies;
• Holding companies; and
• Companies associated in participation, incorporated as commercial or civil companies under the commercial form, cooperatives or public companies, with head office or effective management in Mozambique, irrespective of the value of their contribution, with respect to the income that has effectively been taxed, distributed by an associated resident in the same period.

Dividends from qualifying subsidiaries and capital gains from the sale of shares in a domestic or foreign subsidiary received by a Dutch corporate shareholder are exempted from tax, unless such payments are directly or indirectly deductible for corporate income tax purposes in the country of the subsidiary, irrespective of whether the deduction is actually claimed.

The participation exemption applies when at least 5 percent of the shares in the subsidiary are being held by the Dutch parent company and the subsidiary is not considered a low-taxed passive portfolio investment company.

Dividends

Dividends received by a company tax resident in Norway from another Norwegian company resident in Norway (or similar company resident in the European Economic Area, or EEA) are 97-percent exempt of tax. The remaining 3 percent are taxed with the ordinary corporate income tax rate of 22 percent. For dividends received from a company resident in in a low-tax jurisdiction with the EEA, the 97-percent exemption applies only if real business activities are conducted in that jurisdiction.

Dividends from group companies within the EEA are 100-percent exempt if more than 90 percent ownership.

Dividends received from a foreign company outside the EEA are 97-percent exempt if both of the criteria below are met:

• The Norwegian company has held at least 10 percent of the shares and votes for at least 2 years and
• The foreign country is not a low-tax country.

Capital gains

Capital gains derived by a Norwegian company on the realization of shares in another Norwegian (or EEA-resident) company are exempt from taxation. For capital gains derived by a Norwegian company on the realization of shares in an EEA-company resident in a low-tax jurisdiction, the exemption applies only if real business activities are conducted in that jurisdiction.

Capital gains derived by a Norwegian company on the realization of shares in a company resident outside of EEA are exempt from taxation if both of the criteria below are met:

• The Norwegian company has held at least 10 percent of the shares and votes for at least 2 years and
• The foreign company is not resident in a low-tax jurisdiction.

Foreign income is not exempt in Peru.

There is a participation exemption from withholding tax for dividends based on the EU Parent-Subsidiary Directive. The exemption applies to dividends paid by the Polish company to the EU company provided that the latter company holds at least 10 percent shares of the Polish company for a continuous period of at least 2 years. The exemption is not available if the dividend distribution is aimed at tax avoidance. From 2019, the requirements to apply the withholding tax exemptions have been extended and more formalized.

Dividends and capital gains arising from the disposal of participations in other companies are exempt from corporate tax provided the following requirements are cumulatively met:

• The Portuguese company, directly or indirectly, holds a minimum 10 percent of the capital or voting rights of its subsidiary.

• Such participation is held or maintained for a minimum period of 1 year.

• The Portuguese company is not taxed under the tax transparency rules.

• The participated company is subject and not exempted from CIT or, if EU resident, from a tax mentioned under article 2 of Directive 2011/96/UE or, if resident outside the EU, from a tax similar to the CIT and the rate applicable under such CIT is not below 60 percent of the Portuguese CIT, but note this condition may be waived under certain circumstances (article 66(6) CIT Code).

• The participated company is not resident in a blacklisted jurisdiction.

The capital gains exemption does not apply if the participated company has real estate in Portugal which value represents more than 50 percent of its assets, unless such real estate is used in connection with an agricultural, industrial or commercial activity.

Participation exemptions apply where a minimum holding criteria of 10 percent for at least 1 year is met for:

• Dividends received from an EU company or a company situated in a 3rd country that has concluded a tax treaty with Romania

• Capital gains derived from the sale of the participation titles in a Romanian company or a company resident of a tax treaty jurisdiction and
• The liquidation of a Romanian company or a company resident of a tax treaty jurisdiction.

Dividends received from a Romanian legal entity are non-taxable with no minimum holding requirements.

Dividends received by Russian organizations are taxed with corporate profits tax at a rate of 0 percent, under the following criteria:

• The Russian legal entity receiving the dividend owns at least 50 percent of the capital of the paying entity (or owns depository receipts entitling it to receive at least 50 percent of the total amount of dividends paid) and has a right for at least 50 percent of the dividends declared and
• The participatory interest (shareholding) or depository receipts have been owned for at least 365 consecutive calendar days on the day the dividends are declared.

Dividends received from foreign entities located in the offshore zones (the list of territories treated as the "offshore zones" for this purpose is established by the Ministry of Finance of the Russia) are not eligible to this exemption.

Dividends paid by a Singapore resident company will be exempt from Singapore tax in the hands of the recipient.

Subject to the relevant conditions being met, a Singapore tax resident company can enjoy tax exemption on its foreign-sourced dividends, foreign branch profits and foreign-sourced service income that is received in Singapore. 

If the above conditions cannot be met, a tax exemption may – in specified scenarios – be applied for, in which the Singapore tax authorities may, at their discretion, decide that foreign dividends, foreign branch profits, foreign-sourced income received by a Singapore company and certain foreign-sourced income received by the trustees of Singapore REITs as well as certain foreign-sourced income received by listed Singapore entities from qualifying offshore infrastructure project/asset will nonetheless be exempt.

In certain instances, SA corporates may rely on participation exemptions for dividends received from or capital gains realized on the shares in foreign corporates.

Not applicable for this jurisdiction.

Spanish resident corporations are entitled to the application of the participation exemption on dividends and capital gains received from foreign or domestic subsidiaries provided the following conditions are met:

• Direct or indirect participation of at least 5 percent. If the participation has been acquired before January 1, 2021, during a provisional period of 5 years, there is the possibility of applying this exemption to holdings with an acquisition value of over EUR20 million even though the 5-percent participation is not reached.
• The participation shall be held during the previous fiscal year.
• Subsidiaries must qualify as “active companies” under Spanish regulations, and
• In the case of foreign subsidiaries, they shall be subject to corporate income tax in its country of residence similar to the Spanish Corporate Income Tax. This requirement will be satisfied when the foreign entity is subject to a Corporate Income Tax rate of at least 10 percent or the country of residence has signed a Double Tax Treaty with Spain which includes an information exchange clause.

The above-mentioned dividends and capital gains are exempt, although, for the purposes of applying the exemption, the amount of the dividends and capital gains shall be reduced by 5 percent as management expenses, resulting in an effective taxation of 1.25 percent of the amount of the dividend or capital gain.

Dividends and capital gain on business-related shares are tax exempt in Sweden.

Dividends and capital gain on unlisted shares in a Swedish company are normally considered business-related unless the shares are classified as current assets or inventory. Generally, the shares should be classified as capital assets. If the shares are listed, the shares must represent 10 percent or more of the voting rights in the company and the shares must have been business-related for a period of at least 1 year.

If the shares are held in a foreign company, the same requirements apply. However, the foreign company must also be regarded as the foreign equivalent of a Swedish limited liability company.

Participation exemption is a proportional reduction from corporate income tax equal to the net participation income divided by taxable income. Net participation income is defined as the gross participation income from qualifying dividends or qualifying capital gains less related administration and financing costs and any depreciation of the participation that is linked to the dividend distribution or capital gain. In general, participation exemption results in a full exemption of participation income.

Qualifying dividends are dividends from investments representing at least 10 percent of the share capital or 10 percent of profits and reserves of another company or having a market value of at least CHF1 million. There is no requirement that the dividend-distributing subsidiary is liable to income tax in its jurisdiction.

Qualifying capital gains are generally entitled to participation exemption if the following conditions are cumulatively met: (i) the investment sold was owned by the company for a period of at least 1 year and (ii) it constitutes at least 10 percent of the share capital or 10 percent of profits and reserves of the underlying subsidiary.

Note that capital gains are only entitled to participation exemption provided the sales price exceeds the original investment costs. Therefore, previous depreciations on investments may be taxable.

Not applicable for this jurisdiction.

A participation exemption is provided to dividends derived by resident companies and institutions from other Turkish companies and institutions, venture capital investment funds and venture capital investment trusts. Dividends derived from other investment funds and trusts are not provided with a participation exemption.

Dividends derived from non-residents may also benefit from participation exemption. Such dividends are exempt from tax provided that:

• At least 10 percent of the non-resident company's paid-in capital is owned by the resident company for a period of at least 1 year from the receiving date of the dividend without any interruptions
• The non-resident company is incorporated as a joint stock company or a limited liability company

• The non-resident company is subject to a corporate tax with at least a 15-percent rate (25 percent in cases where the principal activity of the taxpayer provides financing, including financial leasing, insurance or investment in marketable securities)

• The dividends are remitted to Turkey by the date the filing of the annual corporate tax return is due

If (i) the resident company owns at least 50 percent of the non-resident company's (which is incorporated as a joint stock company or a limited liability company) paid-in capital and (ii) the dividends are remitted to Turkey by the date the filing of the annual corporate tax return is due, this exemption shall be applied as 50 percent, even if the other conditions above are not met.

Domestic dividends received from payers of Ukrainian corporate profit tax are exempt from taxation. Dividends received from nonresidents are included in the taxable income of Ukrainian companies.

Not applicable for this jurisdiction.

Almost all dividends received from subsidiaries are exempt from corporation tax except where anti-avoidance legislation applies. Capital gains recognized on the sale of shares in foreign or UK subsidiaries are exempt from tax provided that:

• The subsidiary is a trading company company (ie, one whose income is substantially derived from activities other than passive investment)  or the holding company of either a trading group or a trading sub-group, and
• The selling company has held at least 10 percent of the shares in the subsidiary for at least 12 months in the last 6 years.

Dividends received from foreign corporations may qualify for a 100-percent participation exemption, subject to ownership and holding period requirements. Dividends received from domestic corporations may qualify for a dividends received deduction, subject to ownership requirements.

Dividends remitted to nonresident shareholders from a local company are subject to withholding tax on dividends, except for any amount redistributed by the operator of an approved BOT or BOOT project, and dividends earned by a resident shareholder from a local company are subject to dividends tax.