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V3350-15 30 October 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · exención por doble imposición

Dividend exemption possible if participation and foreign taxation conditions met

The query asks whether dividends from a Dutch subsidiary may be exempt from Corporate Tax. The DGT explains that exemption depends on meeting the minimum participation threshold, holding period, and the subsidiary being subject to a foreign tax equivalent to at least 10%.

The question raised

Question raised 1. Application of the exemption under Article 21 of the Corporate Income Tax Act to the dividend income received by the requesting entity from its Dutch subsidiary, company H.

The DGT's ruling

For the exemption under Article 21 of the Corporate Income Tax Act, a minimum holding of 5% or an acquisition value exceeding 20 million euros is required, held uninterruptedly for one year. If the investee entity is a 'holding company' (more than 70% of its income consists of dividends or capital gains), an indirect participation analysis must be applied to verify that the 5% threshold is met in second-tier entities. Furthermore, as the entity is non-resident, it must satisfy the requirement of being subject to a foreign tax of at least 10% or residing in a country with a double taxation treaty and an exchange of information clause.

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