Institute responds to Feedback Statement on a Participation Exemption for Foreign Dividends

In September 2023, the Minister for Finance, Michael McGrath T.D., committed to introducing a participation exemption for foreign dividends in Finance Bill 2024. With the introduction coming into effect from 1 January 2025, the Department of Finance has sought feedback on the matter.

On 8 May, the Institute responded to the Department’s Feedback Statement and we identified a number of elements of the Strawman Proposal for a Participation Exemption we believe should be reconsidered. These included:

Geographic Scope

The proposal to restrict the exemption to dividends received from companies resident in the EU/EEA or jurisdictions with which Ireland has a double taxation agreement (DTA) is too restrictive. It would mean that dividends received from companies tax resident in some of Ireland’s key trading partners would not qualify for the exemption.

We believe the participation exemption should apply on a global basis with appropriate safeguards where necessary.

Where policymakers may have concerns regarding the potential for double non-taxation for companies not in scope of Pillar Two, we suggested the application of a subject to tax test which would only be applied on a jurisdictional basis for dividends received from non-EU/EEA or non-DTA jurisdictions.

Qualification for the Regime

The participation exemption should apply automatically where the necessary conditions are satisfied, similar to section 626B TCA 1997, but with an option to elect out for an accounting period. The taxpayer should also have the option to elect out of the exemption for each accounting period.

The provisions of section 959V TCA 1997 should apply in the usual manner so that it is possible for a taxpayer to amend the election, if necessary.


Given the extensive existing base erosion protections in the Irish tax code, including the proposed general anti-avoidance provision within this legislation is unnecessary. It would introduce complexity and uncertainty into the regime.


The participation exemption should apply in respect of any dividends received on or after 1 January 2025.

This is instead of granting the relief in respect of dividends received in accounting periods commencing on or after 1 January 2025, as suggested in the Strawman Proposal.

Next Steps

As work on drafting the participation exemption legislation progresses, an iterative process of consulting with stakeholders will help to minimise complexity involved. It will also ensure the exemption can achieve its objective of providing much-needed administrative simplification and greater certainty for businesses.

Noting the Department of Finance’s confirmation that a second Feedback Statement will be published in mid-2024, this timeframe should be adhered to. This will give stakeholders sufficient time to fully consider the impact of the proposed legislative provisions.

Finally, we highlighted that if Ireland is to remain an attractive location for foreign direct investment, a foreign branch exemption should be introduced in Finance Bill 2024 in tandem with the participation exemption for foreign dividends.

Read the submission here