Paschal Donohoe (Dublin Central, Fine Gael)

The participation exemption provides for a double relief tax mechanism, delivered through a participation exemption from Irish corporation tax. It applies to a relevant distribution made from profits or qualifying assets on, or after, 1 January. Distributions made out of either profits or qualifying assets cannot be deductible for foreign tax purposes and must constitute income in the hands of the recipient.

To avail of the exemption, a relevant subsidiary tax resident in an EU-EEA jurisdiction or a jurisdiction that has a double tax agreement which makes a relevant distribution to a parent company. The participation exemption is not available to subsidiaries in a jurisdiction listed on the EU list of non-co-operative jurisdictions for tax matters. The parent company must be tax resident in Ireland or in a non-Irish EEA country and hold a relevant participation in the relevant subsidiary. The parent company must hold a 5% direct or indirect holding of ordinary share capital in the relevant subsidiary and have a 5% entitlement in the relevant subsidiary and have this held for at least 12 months with regard to the ownership of ordinary share capital profits and a distribution or share of assets on a winding-up.

This legislation provides for a targeted anti-avoidance rule that sets out that the participation exemption does not apply where an arrangement has been put in place for obtaining a tax advantage and it is not genuine. What I am outlining here, and I appreciate this is quite technical, is that it is about anti-avoidance and making our anti-avoidance rule more precise to try to deal with any arrangement that could be about gaining a tax advantage. We have here a number of enhancements and clarifications that are coming in to improve the operation of the regime.

If it would help Deputy Doherty, I could provide a further note to him on this.