Revenue eBrief No. 063/26

25 March 2026

Participation exemption for certain foreign distributions

Tax and Duty Manual (TDM) Part 35-02-11 provides guidance on the participation exemption in section 831B TCA 1997, which is a corporation tax exemption for foreign-sourced dividends and other types of distributions. The participation exemption applies to a “relevant distribution” made by a “relevant subsidiary” that is tax resident in a “relevant territory”. The TDM has been updated throughout to reflect amendments made to section 831B by Finance Act 2025.

The main updates are contained in section 3 of the TDM, which outlines conditions the foreign dividend-paying company must meet to qualify as a relevant subsidiary. These updates include the following:

• Relevant distributions made on or after 1 January 2026 by a company resident in a non-EEA or non-tax treaty territory are in scope of the exemption if foreign withholding tax at a nominal rate greater than zero per cent is paid on the full amount of the distribution and not refunded.
• The definitions of “relevant period” and “reference period” are reduced from five years to three years, reducing the period in which a company must be resident in a relevant territory, or have not had certain excluded merger and acquisition activity, prior to making a distribution.
• In cases where the domestic law of a relevant territory does not determine a company’s residence, the residence position will be determined under the terms of the relevant territory’s tax treaty with Ireland.
• A company resident in a territory with which Ireland has a newly signed tax treaty is eligible to qualify as a relevant subsidiary from the date of signature of that tax treaty.
• In the case of a relevant distribution made on or after 1 January 2025, a distributing company is permitted, during the reference period, to have acquired a business or business assets consisting of shares, or to have moved residence from Ireland, or to have had merger and acquisition activity involving an Irish resident company.

Section 5 of the TDM has been updated to provide new guidance on distributions-in-specie and to explain that a distribution made on or after 1 January 2026 is not excluded as a result of it being deductible for the purposes of a tax similar to the close company surcharge in section 440 TCA 1997.