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Roadmap to Dividend Participation Exemption Announced

Ireland’s Department of Finance has published a roadmap for the introduction of a long-awaited dividend participation exemption to Ireland’s corporation tax system. Our Tax team reviews the commitments contained in the announcement and sets out the key milestones in the timeline for implementation.

The Minister for Finance, Michael McGrath TD, recently announced a roadmap for the introduction of a dividend participation exemption to Ireland’s corporation tax regime.


The publication sets out a timeline for implementation, with the dividend participation exemption expected to come into effect from 1 January 2025.

The roadmap also outlines a detailed public consultation process, with the first phase of consultation to run until 13 December 2023. The consultation seeks input from stakeholders on the legislative structure of the dividend participation exemption, as well as any consequential amendments to other provisions which may be necessary to accommodate it. Further stakeholder engagement is anticipated between December 2023 and March 2024, with a Feedback Statement expected by the end of March 2024.

What is a dividend participation exemption?

A dividend participation exemption exempts qualifying dividends from corporation tax in the hands of the recipient.

How does Ireland currently tax foreign dividends?

Ireland operates a worldwide system of taxation; whereby Irish resident companies are taxed on their worldwide profits. In basic terms, for foreign dividends, there is currently a “tax and credit” system, where dividends received are subject to corporation tax in Ireland but a credit is given for tax paid overseas.


The announcement is a welcome one, as Ireland is currently the only EU country, and one of only a handful of OECD countries, that does not already operate a participation exemption for foreign dividends. Historically the absence of a similar exemption has counted against Ireland when compared with other jurisdictions as a holding company location. The introduction of a participation exemption for foreign dividends will serve to improve Ireland’s competitiveness on the global stage and enhance its reputation as an attractive place in which to invest and do business.

While the current corporation tax system for double tax relief on foreign dividends often results in no incremental Irish tax, the rules are complex and can represent an administrative burden for Irish holding companies. The introduction of a full dividend participation exemption would represent a welcome simplification for businesses in this area.

Pillar Two alignment

This announcement is timely, as Ireland will implement the Pillar Two rules, which seek to impose a global minimum effective tax rate of 15%, with effect from 1 January 2024. Measures such as a dividend participation exemption will bring Ireland’s corporation tax code closer to a territorial system and therefore more closely aligned with the Pillar Two rules. The one disappointment is that the introduction of the dividend participation exemption will not come into effect simultaneously with the implementation of the Pillar Two regime. This timing mismatch could potentially cause challenges for taxpayers attempting to get to grips with the new rules.

It is worth noting that the roadmap does not commit to the introduction of a foreign branch participation exemption, which is a common feature of a number of territorial tax regimes worldwide. Instead, the Minister has committed to a detailed examination of the policy considerations relative to such an exemption, and some of the questions in the public consultation are aimed at exploring the potential benefits of introducing one.


We welcome the Minister’s commitment to introducing a participation exemption for foreign dividends and we look forward to seeing it implemented. It will serve to enhance Ireland’s reputation as a destination in which to invest and do business. We hope it will provide administrative simplification and a greater level of certainty to Irish holding companies in tax matters.

Interested parties are encouraged to engage with the public consultation before the 13 December 2023 deadline. This will ensure stakeholder views are conveyed on the likely structure and operation of the participation exemption.

For more information and expert advice regarding the impact a participation exemption for foreign dividends will likely have on your organisation, contact a member of our Tax team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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