Participation Exemption

Capital gains on the transfer of company holdings, under certain conditions, are 95% exempt from taxation. Capital losses are not deductible.

The legal conditions for exemption are the following:

  • uninterrupted holding as from the first day of the 12th month preceding that of the transfer; holdings acquired more recently will be deemed to be transferred first (LIFO basis);
  • classification of holdings as fixed asset investments as from the first balance sheet closed during the period of ownership;
  • tax residence of the subsidiary in a country or territory other than those with a preferential tax system;
  • exercise by the subsidiary of actual commercial activities in territory other than those with a prefer

The conditions set out in paragraphs c) and d) must be met without interruption at least as from the beginning of the third tax period prior to one of the transfers.


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