Participation exemption: foreign dividends received by Irish companies

Since 2025 an Irish company can choose to exempt dividends from foreign subsidiaries it owns 5% or more of. The other way is to pay tax and claim a credit.

Until 2025, an Irish company receiving a dividend from a foreign subsidiary paid corporation tax on it. It claimed a credit for the foreign tax the subsidiary had paid on its profits. That ‘tax and credit’ system still exists. But section 831B, brought in by Finance Act 2024 and widened by Finance Act 2025, adds a simpler choice: exempt the dividend altogether. Revenue's guidance is Tax and Duty Manual 35-02-11.

Who can use it

• The parent is an Irish resident company, or a company from the European Economic Area taxed in Ireland on the dividend.
• It owns at least 5% of the subsidiary's ordinary shares. It also has a right to at least 5% of its distributable profits and of its assets on a winding up.
• It has held that stake for at least 12 months, including the day of the dividend.
• The subsidiary is resident in a European Economic Area country or a country with a tax treaty with Ireland. It is not generally exempt from tax there. Countries on the EU list of non-cooperative jurisdictions are excluded.
• It has met those residence conditions for a look-back period: five years for 2025 dividends, three years from 2026. From 2026, dividends from some other countries that charge withholding tax on them can also qualify.

Life assurance companies, investment funds and section 110 companies can't claim it. Dividends that were deductible for the payer, or come from offshore funds, don't qualify.

What it is worth

Without the exemption, a €500,000 foreign dividend is taxed at 25%: €125,000.00. Where section 21B applies, broadly to dividends paid out of trading profits, it is 12.5%: €62,500.00. Credits for foreign tax then come off. With the exemption there is no Irish tax, and no credit to work out. If the foreign tax was high, the old credit system may already leave nothing to pay; the exemption saves the paperwork.

Claiming

The company claims on its corporation tax return (Form CT1) for the accounting period in which the dividend is paid, and can choose each year. If it claims the exemption for a dividend, it gets no credit or relief for any foreign tax on that dividend. If it doesn't, the dividend is taxed as before.

Selling shares in the same kind of subsidiary may be exempt too: see the section 626B exemption. For the company's overall tax, use the corporation tax calculator.

Work it out

• Corporation tax for your company →

Sources

• Revenue: Corporation Tax: basis of charge (12.5% trading, 25% non-trading and excepted trades) (checked 25/10/2026)
• Revenue: Dividend Withholding Tax (25%) (checked 16/10/2026)

General information, not tax advice. HeyPenny is not a tax agent.