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document 16
Annex 2 
 
 
QUESTIONNAIRE FOR MONITORING THE IMPLEMENTATION 
OF THE GUIDANCE AGREED ON INBOUND PROFIT 
TRANSFERS 
 
CONSOLIDATED REPLIES FROM MEMBER STATES 
 
 
 
INDEX: 
 
 Member 
State 
Page 
1 Austria 

2 Belgium 

3 Bulgaria 
12 
4 Cyprus 
17 
5 Czech 
Republic 
20 
6 Denmark 
26 
7 Estonia 
30 
8 Finland 
33 
9 France 
(missing) 
38 
10 Germany 
39 
11 Greece 
42 
12 Hungary 
47 
13 Ireland 
52 
14 
 
 
15 Latvia 
60 
16 Lithuania 
64 
17 Luxembourg 
71 
18 Malta 
(missing) 
75 
19 Netherlands 
76 
20 Poland 
79 
21 Portugal 
83 
22 Romania 
88 
23 Slovak 
Republic 
91 
24 Slovenia 
95 
25 Spain 
99 
26 
 
 
27 United 
Kingdom 
108 
Page 1 of 110 
 

Annex 2 
01. AUSTRIA 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

The Austrian Corporate Income Tax Act provides for an exemption for intercompany profit 
distributions. This participation exemption generally applies to domestic as well as to foreign 
participations without any further requirements like a minimum participation (holding quota) or a 
minimum holding period. The scope of the participation exemption does only cover profit 
distributions, however not realised and unrealised capital gains or losses (see 2). 
 
1a. If yes: 
 
¾  Do you have a minimum 
The exemption for profit distributions from domestic 
participation requirement. Is this 
participations applies without any further requirements. 
different for domestic, EU, treaty 
For profit distributions from EU and 3rd country 
or 3rd country participations? 
participations, the exemption generally applies without 
Please explain. 
any further requirements as well, irrespective of the 
holding quota or holding period. It is however required 
that the foreign company distributing the dividend is 
comparable with a domestic company. Profit distributions 
from third country portfolio participations (< 10%) are, 
furthermore, only exempted if a comprehensive mutual 
assistance between Austria and the third country is in 
place. 
The exemption for inbound intercompany profit 
distributions from corporate income tax does therefore 
neither require a minimum participation quota nor a 
minimum holding period. 
 
¾  Is there a minimum holding 
See above. 
period? Is this different for 
 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
The exemption for profit distributions from domestic 
"minimum effective taxation" 
participations applies without any further requirements. 
requirement? If yes, please 
The exemption for profit distributions from participations 
explain. 
in foreign companies does not apply, if the foreign 
subsidiary does not meet certain requirements. These 
requirements differ between foreign substantive 
participations (> 10%) and foreign portfolio participations 
(< 10%): 
The participation exemption is not applicable for profit 
distributions from substantive participations held in 
foreign companies in case the foreign subsidiary’s main 
activity is to generate passive income and the subsidiary is 
located in a tax jurisdiction, that does not effectively tax 
comparably to domestic companies. This is the case, if the 
effective tax rate is lower than 15%. If these criteria are 
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Annex 2 
fullfilled, the credit method applies instead of the 
exemption method (“switch-over clause”). 
The participation exemption is not applicable for profit 
distributions from  portfolio participations held in foreign 
companies in case company is located in a tax jurisdiction, 
that does not provide for a tax rate comparable to the 
domestic tax rate of 25%. This is the case, if the effective 
tax rate is lower than 15% or the company is subject to a 
comprehensive exemption. If one of those criteria is 
fullfilled, the credit method applies instead of the 
exemption method (“switch-over clause”). 
Irrespective of whether the foreign company generates 
passive income and/or is located in a low tax jurisdiction, 
the exemption method for profit distributions is denied 
insofar as the payment has been deductible abroad. In 
those cases however, there is no switch-over to the credit 
method. 
¾  Does the "subject-to-tax" or 
The minimum effective taxation requirement does also 
"minimum effective taxation" 
consider the taxation of indirect subsidiaries; underlying 
requirement apply to the 
taxes are taken into consideration. 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  Underlying taxes are taken into consideration for means of 
available in case one of the above 
determining the tax credit. 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 

 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Whereas the application of the participation exemption does generally not distinguish between 
domestic, EU and 3rd country participations, there is a different treatment for capital gains from 
domestic participations on the one hand, and foreign participations on the other hand:  
Capital gains arising from the sale of domestic participations as well as from the sale of domestic 
portfolio participations are treated tax effectively as ordinary business profits. The Austrian Corporate 
Income Tax act does not provide for an exemption for capital gains deriving from the sale of these 
participations.  
On the other hand, the Austrian Corporate Income Tax Act provides for an international participation 
exemption for realised and unrealised capital gains and losses. Capital gains arising from the sale of 
foreign participations (EU, 3rd country) are treated tax neutral as a general rule if certain requirements 
are met. 
 
 
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Annex 2 
2a. If yes: 
 
¾  Is there a minimum participation 
The international participation exemption for realised and 
requirement. Is this different for 
unrealised capital gains and losses applies to substantive 
domestic, EU, treaty or 3rd country  participation only. This requires a minimum participation 
participations? Please explain. 
of 10 % held in the foreign subsidiary as well as a 
minimum holding period of one year. Further, the foreign 
subsidiary sold off has to be comparable to a domestic 
company in order to qualify as substantive international 
participation. 
The international participation exemption provides for a 
tax neutral treatment of realised and unrealised capital 
gains (and losses) as a general rule. However, the taxpayer 
may opt – in the year of the acquisition of a foreign 
participation – for tax effective treatment of realised and 
unrealised capital gains (or losses) arising from that 
participation. If the taxpayer exercises the option for tax 
effective treatment, capital gains are treated tax effectively 
as ordinary business profits. The option for tax effective 
treatment is irrevocable. 
¾  Is there a minimum holding 
See above. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
The switch over clause (see 1a) does not only apply to 
"minimum effective taxation" 
profit distributions but also to realised and unrealised 
requirement? If yes, please 
capital gains. Generally, the switch-over clause applies in 
explain. 
case the foreign subsidiary’s main  activity is to generate 
passive income and the subsidiary is located in a tax 
jurisdiction, that does not effectively taxed comparably to 
domestic companies. This is the case, if the effective tax 
rate is lower than 15%. 
¾  Is a tax credit for underlying taxes  Underlying taxes are taken into consideration for means of 
available in case one of the above 
determining the tax credit. 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 


 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Realised capital losses (historical acquisition costs - sales price ) from domestic participations are 
treated tax effectively in general. However, there are restrictions to the deduction of these capital 
losses. Capital losses arising from the sale of a domestic participation have to be spread over seven 
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Annex 2 
years. In other words, they can be deducted only to 1/7 in the year of realisation.  
Realised capital losses from foreign substantive participations (> 10%, EU, 3rd countries) are treated 
tax neutral as a general rule. Only if the tax payer has opted into tax effective treatment in the year of 
the former acquisition (see 2b), a capital loss is taken into consideration. If that is the case, it is treated 
like a loss from domestic participations; therefore it has to be spread over 7 years.  
Realised capital losses from the sale of a foreign portfolio participation (< 10%, EU, 3rd countries) are 
treated like losses from domestic participations (tax effectively, however spread over 7 years).  
Whenever capital losses have to be spread over seven years, the deduction can only be accelerated if 
realised or unrealised capital gains derive from another participation held as fixed asset within the 
seven-years-period. In those cases, 1/7 spreads that have not been offset so far may be fully offset 
against these realised and unrealised capital gains. The same is true for recapture taxation of the same 
participations (see below, 5) 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
Unrealised capital losses from domestic participations allow the taxpayers to write off the participation 
(depreciation = book value - “fair value”) tax effectively. However, the same restrictions as for 
realised capital losses apply. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
A participation written off in value (see 4) is subject to a mandatory, tax effective recapture (write up 
in value, unrealised capital gain), if the value of the participation increases due to any reasons 
(Jurisprudence of the Highest Administrative Court). 
If the value of the participation recovers within seven years since its write off, 1/7 spreads that have 
not been offset yet may be fully offset against these realised and unrealised capital gains. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
A deduction of good will arising from the acquisition of a participation is only available under the 
group taxation regime (when acquiring a new group member). Generally, the good will is calculated – 
in accordance with the holding quota – as follows: 
Acquisition cost of the participation 
-(proportionate Equity in the balance sheet + hidden reserves in the fixed assets) 
However, the depreciable good will is limited to 50 % of the  acquisition costs of the participation. A 
good will calculated in accordance with these rules and restrictions has to be spread over 15 years. 
The deduction of good will is however denied, if the acquisition takes place within the same group of 
companies. 
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Annex 2 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No. 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
[reply] 
Please indicate. 
¾  A "low-or-no-tax" test? Please 
[reply] 
indicate. 
¾  An activities based test? Please 
[reply] 
indicate. 
¾  An income based test? Please 
[reply] 
indicate. 
¾  Any other test? Please indicate. 
[reply] 
¾  Is there a layer limitation in the 
[reply] 
CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes  [reply] 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please 
explain. 

¾  Do you provide advance clearance  [reply] 
on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Austria does not apply a CFC legislation, providing for the immediate taxation of profits realised by a 
foreign subsidiary. Instead, Austria applies a “CFC-type legislation”, however, with the aim to avoid a 
taxfree repatriation of profits. Under certain circumstances, the application of the exemption method is 
denied; instead, the credit method applies (“switch-over-rule”) – see before. 
 
 
_____________________ 
 
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Annex 2 
02. BELGIUM 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

OUI.  Il s’agit en fait d’une déduction de 95 % du montant du dividende encaissé ou recueilli (articles 
202, § 1er et 204 du Code belge des impôts sur les revenus (CIR 92) 
 
1a. If yes: 
 
¾  Do you have a minimum 
Oui. Conformément à l'article 202, § 2, 1° CIR 92, les 
participation requirement. Is this 
dividendes reçus ne sont déductibles que pour autant qu'à 
different for domestic, EU, treaty 
la date d'attribution ou de mise en paiement de ceux-ci, la 
or 3rd country participations? 
société qui en bénéficie, détienne dans le capital de la 
Please explain. 
société qui les distribue une participation de 10 p.c. au 
moins ou dont la valeur d'investissement atteint au moins 
2.500.000 EUR, sans faire de différence selon que les 
dividendes sont domestiques, UE, traité ou pays tiers . 
¾  Is there a minimum holding 
Oui. Conformément à l'article 202, § 2, 2° CIR 92, les 
period? Is this different for 
dividendes ne sont déductibles que pour autant que ces 
domestic, EU, treaty or 3rd country  revenus se rapportent à des actions ou parts qui sont ou 
participations? Please explain. 
ont été détenues en pleine propriété pendant une période 
ininterrompue d'au moins un an, sans faire de 
différence
 selon que les dividendes sont domestiques, UE, 
traité ou pays tiers. 
¾  Is there a "subject-to-tax" or 
Oui. Les dividendes ne sont, conformément à l'article 203, 
"minimum effective taxation" 
§ 1er, CIR 92 pas déductibles lorsqu'ils sont alloués ou 
requirement? If yes, please 
attribués par: 
explain. 
 1° 
une société qui n'est pas assujettie à l'impôt des 
sociétés ou à un impôt étranger analogue à cet impôt ou 
qui est établie dans un pays dont les dispositions du droit 
commun en matière d'impôts sont notablement plus 
avantageuses qu'en Belgique
;  
Les dispositions de droit commun, sont présumées être 
notablement plus avantageuses qu'en Belgique lorsque: 
- soit le taux nominal de droit commun de l'impôt sur les 
bénéfices de la société est inférieur à 15 p.c.
- soit, en droit commun, le taux correspondant à la charge 
fiscale effective est inférieur à 15 p.c. 
Les dispositions du droit commun en matière d'impôts qui 
sont applicables aux sociétés établies dans un Etat 
membre de l'Union européenne
 sont censées ne pas être 
notablement plus avantageuses qu'en Belgique. 
2° une 
société de financement, une société de 
trésorerie ou une société d'investissement qui, bien 
qu'assujettie, dans le pays de son domicile fiscal, à un 
impôt visé au 1°, bénéficie dans celui-ci d'un régime 
fiscal exorbitant
 du droit commun; 
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Annex 2 
3° 
une société dans la mesure où les revenus 
qu'elle recueille, autres que des dividendes, trouvent leur 
source en dehors
 du pays de son domicile fiscal et 
bénéficient dans le pays du domicile fiscal d'un régime 
d'imposition distinct exorbitant du droit commun; 
4° 
une société dans la mesure où elle réalise des 
bénéfices par l'intermédiaire d'un ou de plusieurs 
établissements étrangers qui sont assujettis d'une manière 
globale à un régime de taxation notablement plus 
avantageux qu'en Belgique. 
 
Les conventions préventives de la double imposition 
conclues par la Belgique avec des pays en développement 
peuvent assouplir ces exigences, à condition que les 
dividendes proviennent de bénéfices tirés d’activités 
d’entreprise. 
¾  Does the "subject-to-tax" or 
Oui. Conformément à l'article 203, § 1, 5° CIR 92, les 
"minimum effective taxation" 
dividendes ne sont en outre pas déductibles lorsqu'ils sont 
requirement apply to the 
alloués ou attribués par une société, autre qu'une société 
subsidiary only or also to indirect 
d'investissement, qui redistribue des dividendes qui, en 
subsidiaries. Please explain. 
application du 1° à 4°, ne pourraient pas eux-mêmes être 
déduits à concurrence d'au moins 90 p.c. 
   
 
¾  Is a tax credit for underlying taxes  NON  
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
Sans objet 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
OUI, Conformément à l'article 192, § 1er, CIR 92 
Lorsque ces participations ont été détenues en pleine propriété pendant une période ininterrompue d'au 
moins un an. 
En ce qui concerne le portefeuille commercial de sociétés financières, l'exonération des plus-values ne 
s'applique pas. Les valeurs contenues dans ce portefeuille commercial sont traitées comme des stocks 
avec taxation des plus-values et déduction des moins-values ou réductions de valeur, les plus-values 
non réalisées et les réductions de valeur devant être exprimées dans les comptes annuels  
 
 
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Annex 2 
2a. If yes: 
 
¾  Is there a minimum participation 
NON 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding 
OUI. La participation doit avoir été détenue en pleine 
period? Is this different for 
propriété pendant une période ininterrompue d'au moins 
domestic, EU, treaty or 3rd country  un an. 
participations? Please explain. 
¾  Is there a "subject-to-tax" or 
OUI 
"minimum effective taxation" 
(voir réponse à la question 1a) 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  NON 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Si la condition de détention d'au moins un an n'est pas remplie, la plus-value sera taxée à un taux fixé à 
25 p.c. 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Non. Conformément à l'article 198, 7° CIR 92, les moins-values réalisées sur les actions ou parts ne 
sont pas considérées comme des frais professionnels, à l’exception des moins-values actées à 
l’occasion du partage total de l’avoir social d’une société jusqu’à concurrence de la perte du capital 
libéré représenté par ces actions ou parts. 
Toutefois, les valeurs contenues dans le portefeuille commercial de sociétés financières sont traitées 
comme des stocks avec déduction des moins-values réalisées. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
Non. Toutefois, les valeurs contenues dans le portefeuille commercial de sociétés financières sont 
traitées comme des stocks avec déduction des réductions de valeur. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
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Annex 2 
yes please explain the methodology. 
Non, sauf en ce qui concerne les réductions de valeur qui ont été déduites sur des actions ou parts 
contenues dans le portefeuille commercial de sociétés financières; celles-ci sont recapturées par leur 
prise en compte dans le calcul de la plus-value réalisée ultérieurement qui sera soumise à taxation. De 
même, les reprises de réductions de valeur sur actions ou parts comptabilisées avant le 24.07.1991 et 
qui ont été déduites des montants soumis à taxation suivant la fiscalité applicable à l'époque, seront 
intégrées au bénéfice taxable de la période imposable au cours de laquelle elles sont reprises. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
Non 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Non 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
Sans objet 
Please indicate. 
¾  A "low-or-no-tax" test? Please 
Sans objet 
indicate. 
¾  An activities based test? Please 
Sans objet 
indicate. 
¾  An income based test? Please 
Sans objet 
indicate. 
¾  Any other test? Please indicate. 
Sans objet 
¾  Is there a layer limitation in the 
Sans objet 
CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes  Sans objet 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please 
explain. 

¾  Do you provide advance clearance  Sans objet 
on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
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Annex 2 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Oui, le nouvel article 344, § 1er du Code belge des impôts sur les revenus introduit en droit fiscal belge 
une mesure générale anti-abus reconnaissant l’abus de droit en matière fiscale. Par exemple, une filiale 
ou une sous-filiale « boîte aux lettres » ou une filiale ou une sous-filiale « écran » peut constituer une 
construction purement artificielle. Dans ce cas, le fisc belge peut agir comme si l’abus n’avait eu lieu. 
 
 
--------------------------- 
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03. BULGARIA 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Bulgarian legislation provides for the following tax treatment of dividends:  
1. Dividends distributed by a Member State or another country – a Party to the Agreement on 
the European Economic Area.
 
Revenues resulting from the distribution of dividends by resident legal entities and foreign legal 
persons who are residents for tax purposes of a European Union’s Member State or another country in 
the European Economic Area to local entities are not subject to corporate tax. An exception to this rule 
is the case of hidden profit distribution. There is also an exception when the accrued income is as a 
result of dividends distributed by licensed companies with special investment purpose under the Act 
on Companies with Special Investment Purpose. 
There is a provision in the law which regulates the tax treatment of dividends distributed as a result of 
investments where the investments are accounted for using the equity method. When the financial 
result of shareholders for tax purposes is determined, the accounting result is reduced with the 
dividends distributed by resident legal persons or by non-resident persons who are residents for tax 
purposes of a Member State or another country - a Party to the Agreement on the European Economic 
Area when the investment is accounted for using the equity method.  
 
2. Dividends distributed by a country with which Republic of Bulgaria has concluded a double 
taxation agreement.  

If there is a double taxation agreement in force, legal entities may opt to apply its provisions.  
 
3. Dividends distributed by a third country with which Republic of Bulgaria does not have a 
double taxation agreement. 

No tax exemption is provided for revenues received as a result of dividends distributed by a third 
country. It is not envisaged the accounting financial result to be reduced with dividends distributed by 
third countries if the investment is accounted for using the equity method.  
 
1a. If yes: 
 
¾  Do you have a minimum 
No minimum participation in the company’s capital is 
participation requirement. Is this 
required. Taxation is as defined above.  
different for domestic, EU, treaty 
 
or 3rd country participations? 
Please explain. 

¾  Is there a minimum holding 
There is no requirement for a minimum holding period in 
period? Is this different for 
the company’s capital. Taxation is as defined above.  
domestic, EU, treaty or 3rd country   
participations? Please explain. 
¾  Is there a "subject-to-tax" or 
 No 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

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Annex 2 
¾  Does the "subject-to-tax" or 
No 
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  If there is no obligation the provisions of international 
available in case one of the above 
treaties to be applied (if an international treaty ratified by 
requirements is not met? Please 
the Republic of Bulgaria, promulgated and entered into 
explain. 
force, contains provisions different from the provisions of 
the Corporate Income Tax Act, the provisions of the treaty 
are applied), the taxpayers are entitled to a tax credit under 
the terms and conditions of the Corporate Income Tax Act
When the corporate tax or alternative tax under the 
Corporate Income Tax Act is assessed, taxpayers are 
entitled to a tax credit in respect of each tax similar to 
corporate income tax or imposed in lieu of such tax and 
paid abroad. The tax credit is assessed for each country 
and each type of income separately and is limited to the 
Bulgarian tax on such profits or income.  
 
1b. If no, please briefly explain your credit system. 
-  N/A 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
No 
 
2a. If yes: 
 
¾  Is there a minimum participation 
N/A 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding 
N/A 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
N/A 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  N/A 
available in case one of the above 
requirements is not met? Please 
explain. 

 
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Annex 2 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Capital gains are taxed as ordinary profits.  
However, the Corporate Income Tax Act provides for a tax exemption described hereafter.  When the 
financial result for tax purposes is determined, the accounting result is reduced with the profit realized 
from the disposition of financial instruments within the meaning of § 1,  item 21 of the Supplementary 
Provisions and determined as a positive difference between the selling price and the documented cost 
of acquisition of the said financial instruments. This does not apply to any profits from a source 
outside Bulgaria in respect of which the method of avoidance of double taxation is “exemption with 
progression”, provided for in a double taxation treaty.  
§ 1, item 21 of the Supplementary Provisions of the Corporate Income Tax Act  stipulates that 
"Disposition of financial instruments" for the purposes of Articles 44 herein shall be any transaction: 
(a) in units in collective investment schemes, shares and rights, effected on a regulated market within 
the meaning given by Article 73 of the Markets in Financial Instruments Act; "rights" for the purposes 
of sentence one shall be the securities entitling the holder to subscribe for a specified number of shares 
in connection with a passed resolution on an increase of capital; 
(b) concluded under the terms and according to the procedure of repurchase or redemption by 
collective investment schemes which have been admitted to public offering in Bulgaria or in another 
Member State of the European Union, or in a State, a Party to the Agreement on the European 
Economic Area; 
(c) concluded under the terms and according to the procedure of tender offering under Section II of 
Chapter Eleven of the Law on the Public Offering of Securities, or transactions of analogous type in 
another Member State of the European Union, or in a State, a Party to the Agreement on the European 
Economic Area. 
If there is a double taxation agreement in force, legal entities may opt to apply its provisions.  
No tax exemption is envisaged in any other cases not mentioned herein.  
 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No  
In case of the tax relief cited above (item 2b), similar to gains, losses from these transactions are not 
recognized for tax purposes., namely, when the tax financial result is determined, the accounting 
financial result is increased with the loss from the disposition of financial instruments (within the 
meaning of § 1, item 21 of the additional provisions of the law) which is defined as the negative 
difference between the selling price and the documented cost of acquisition of the said financial 
instruments. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
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Annex 2 
No     
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
No 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No  
Goodwill arisen as a result of business combination is not a depreciable asset for tax purposes. Losses 
as a result of impairment and write-off of goodwill are not tax deductible.  
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No 
 
7a. If yes, does the definition of a CFC 
-  
contain: 
¾  A minimum shareholding test? 

Please indicate. 
¾  A "low-or-no-tax" test? Please 

indicate. 
¾  An activities based test? Please 

indicate. 
¾  An income based test? Please 

indicate. 
¾  Any other test? Please indicate. 

¾  Is there a layer limitation in the 

CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes  
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please 
explain. 

¾  Do you provide advance clearance  
on the non-applicability of your 
CFC provisions? If yes, please 

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Annex 2 
explain via examples. 
 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

According to the Corporate Income Tax Act, “a dividend is the distribution in favour of a person, 
arising from the holding that such person has in the capital of another person, resulting in a reduction 
of the owners' equity of the latter, including: 
(a) income from shares; 
(b) income from participations, even in unincorporated associations, and from other corporate rights, 
where treated as income from shares; 
(c) hidden profit distribution.” 
Any distribution which, according to accounting legislation, has been recognised as an expense for the 
distributing entity is not a dividend, with the exception of the cases of hidden profit distribution. 
In general, income received from the distribution of dividends by resident legal entities and foreign 
legal persons who are residents for tax purposes of a Member State or another country - a Party to the 
Agreement on the European Economic Area is not recognized as a taxable income. This provision 
does not apply in case of hidden profit distribution. Thus, in case of hidden profit distribution which 
falls within the definition of a dividend, the revenue from this hidden profit distribution (dividend) is 
recognized for tax purposes, namely, it is a taxable income. The income received from hidden 
distribution of profits is a taxable income for the taxpayers. Therefore, revenues received as result of a 
hidden profit distribution are involved in determining the taxable income. 
There is also a provision according to which in the case of dividends in the form of a hidden profit 
distribution, the provision which allows the financial result for tax purposes of the shareholders to be 
reduced with the dividends distributed by resident legal entities or foreign legal persons who are 
residents for tax purposes of a Member State or another country - a Party to the Agreement on the 
European Economic Area (where the investment is accounted for using the equity method) does not 
apply. 
The Law on Corporate Income Tax gives a definition of a hidden profit distribution. 
Moreover, under the definition of a dividend, аny distribution by a foreign legal entity which 
(according to accounting legislation) has been recognized as an expense for the distributing foreign 
entity is not a dividend.  
The Bulgarian Law on Corporate Income Tax contains provisions which regulate the prevention of tax 
evasion. These are the provisions related to the performance of commercial and financial relations 
under terms which affect the amount of the tax base and which differ from the terms between 
unrelated parties. There are also provisions which govern transactions between unrelated parties 
concluded under terms which fulfillment leads to tax evasion. In these cases, the tax base is 
determined without these transactions, some of their terms or their legal form to be taken into account. 
The tax base that would result from a customary transaction at market prices which aims to achieve the 
same economic result but without to lead to tax evasion must be taken into consideration instead.  
Finally, the law stipulates that if a transaction is used in order to conceal another, the tax liability 
should be assessed under the terms of the concealed transaction.  
 
Please note that the provisions of the Bulgarian Corporate Income Tax Act cited above are not an 
official translation in English language.  
---------------------- 
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Annex 2 
04. CYPRUS 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes. However, dividends distributed by a foreign subsidiary will be subject to special contribution for 
the defence, if the subsidiary: 
         (i) Directly or indirectly engages more than 50% in activities which lead to investment income, 
and  
         (ii) The foreign tax burden on the profits out of which the dividends are paid is substantially 
lower than the tax burden of the recipient of the dividend in Cyprus. 
 
1a. If yes: 
 
¾  Do you have a minimum 
No 
participation requirement. Is this 
different for domestic, EU, treaty 
or 3rd country participations? 
Please explain. 

¾  Is there a minimum holding 
No 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
See 1 above. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Does the "subject-to-tax" or 
To direct subsidiaries only. 
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  Only if stipulated in a Double Tax Agreement. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
N/A 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes. 
 
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Annex 2 
2a. If yes: 
 
¾  Is there a minimum participation 
No. 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding 
No. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
No, only the stipulated conditions that must be met. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  No. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

N/A 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
N/A 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 

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Annex 2 
deductible amount (write down, amortisation, provision). 
No. 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No. 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? Please 
N/A 
indicate. 
¾  A "low-or-no-tax" test? Please indicate.  N/A 
¾  An activities based test? Please 
N/A 
indicate. 
¾  An income based test? Please indicate. 
N/A 
¾  Any other test? Please indicate. 
N/A 
¾  Is there a layer limitation in the CFC-
N/A 
definition (application to indirect 
subsidiaries).  

¾  Is a tax credit for underlying taxes 
N/A 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance on 
N/A 
the non-applicability of your CFC 
provisions? If yes, please explain via 
examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Dividends distributed by a foreign subsidiary will be subject to special contribution for the defence, if 
the subsidiary: 
         (i) Directly or indirectly engages more than 50% in activities which lead to investment income, 
and  
         (ii) The foreign tax burden on the profits out of which the dividends are paid is substantially 
lower than the tax burden of the recipient of the dividend in Cyprus. 
 
 
------------------------------ 
 
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Annex 2 
05. CZECH REPUBLIC 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

The Czech Republic provides for an exemption of inbound intercompany dividends if certain 
conditions are met. 
Section 19 subsection 1 letter ze) the point 1 Income taxes Act*: 
The following shall be subject to tax exemption: 
Income (capital gains) 
1. in the form of dividends and other shares in (portions of) profits paid out by a subsidiary, which is a 
taxpayer referred to in section 17 (3), to its parent company (entity).  
 
1a. If yes: 
 
¾  Do you have a minimum 
For domestic companies and the EU: Minimum 
participation requirement. Is this 
shareholding  is required 10% (section 19 subsection  3 
different for domestic, EU, treaty 
point. b) and c)) 
or 3rd country participations? 
For companies of third countries (section 19 subsection 9) 
Please explain. 
- is a tax resident in a third State with which the Czech 
Republic has concluded an effective double taxation 
treaty, and 
  - is in the legal form comparable to the features of a 
limited liability company, joint stock company or 
cooperative under other statutory provisions, and  
  - is in a similar relationship to the taxpayer, to whom this 
income is generated from dividends, other shares of profit 
or transfer of a shareholding, as is that of a subsidiary to 
its parent company under the conditions laid down in 
subsections (3) and (4)**, and 
- is liable to a tax which is comparable to (Czech) 
corporate income tax and which is not below 12% in at 
least the taxable period when the taxpayer referred to in 
section 17(3)  posts this income (gained from dividends, 
other shares of profits or transfer of a shareholding in a 
company) as a receivable in his books of accounts 
pursuant to other statutory provisions, and also in the 
taxable period preceding the taxable period in question; 
where a company has been wound up without having gone 
into liquidation, this condition must be met by the 
company´s legal predecessor. However, a company 
/business entity) which is tax-exempt or may opt to be tax-
exempt or may claim a relief from corporate tax, shall not 
be deemed to be company (business entity) liable to 
corporate (or similar) tax. 
Tax exemptions pursuant to subsection (1) (ze) and (zi) 
and pursuant to this subsection may be claimed if the 
recipient of income from dividends, other shares of profits 
and a shareholding transfer is the beneficial owner of this 
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Annex 2 
income.  
¾  Is there a minimum holding 
For domestic companies and the EU: minimum 
period? Is this different for 
shareholding period of 12 months (section 19 subsection 3 
domestic, EU, treaty or 3rd country  point. b) and c)) 
participations? Please explain. 
For the third country (section 19 subsection 9): see 1a 
¾  Is there a "subject-to-tax" or 
For third countries: subject- to- tax :minimum 12% 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Does the "subject-to-tax" or 
The minimum taxation applies only to the subsidiary.  
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  No. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
The Czech Republic provides for an exemption of capital gains on participations if certain conditions 
are met. 
Section 19 subsection 1 letter ze) point 2 
The following shall be subject to tax exemption: 
Income (capital gains) 
from the transfer of a parent company´s shareholding (ownership interest) in a subsidiary effected by a 
taxpayer referred to in section 17(3) or effected by a company that is a tax resident in another EU 
Member State.    
 
 
2a. If yes: 
 
¾  Is there a minimum participation 
For domestic companies and the EU: Minimum 
requirement. Is this different for 
shareholding  is required 10% (section 19 subsection  3 
domestic, EU, treaty or 3rd country  point. b) and c)) 
participations? Please explain. 
For companies of third countries (section 19 subsection 9) 
- is a tax resident in a third State with which the Czech 
Republic has concluded an effective double taxation 
treaty, and 
  - is in the legal form comparable to the features of a 
Page 21 of 110 
 

Annex 2 
limited liability company, joint stock company or 
cooperative under other statutory provisions, and  
  - is in a similar relationship to the taxpayer, to whom this 
income is generated from dividends, other shares of profit 
or transfer of a shareholding, as is that of a subsidiary to 
its parent company under the conditions laid down in 
subsections (3) and (4)**, and 
- is liable to a tax which is comparable to (Czech) 
corporate income tax and which is not below 12% in at 
least the taxable period when the taxpayer referred to in 
section 17(3)  posts this income (gained from dividends, 
other shares of profits or transfer of a shareholding in a 
company) as a receivable in his books of accounts 
pursuant to other statutory provisions, and also in the 
taxable period preceding the taxable period in question; 
where a company has been wound up without having gone 
into liquidation, this condition must be met by the 
company´s legal predecessor. However, a company 
/business entity) which is tax-exempt or may opt to be tax-
exempt or may claim a relief from corporate tax, shall not 
be deemed to be company (business entity) liable to 
corporate (or similar) tax. 
Tax exemptions pursuant to subsection (1) (ze) and (zi) 
and pursuant to this subsection may be claimed if the 
recipient of income from dividends, other shares of profits 
and a shareholding transfer is the beneficial owner of this 
income.  
¾  Is there a minimum holding 
For domestic companies and the EU: minimum 
period? Is this different for 
shareholding period of 12 months (section 19 subsection 3 
domestic, EU, treaty or 3rd country  point. b) and c)) 
participations? Please explain. 
For the third country (section 19 subsection 9): see 2a 
¾  Is there a "subject-to-tax" or 
For third countries: subject-to-tax: min:12% 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  No. 
available in case one of the above 
 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
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Annex 2 
No, the realised capital losses are not deductible.  
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No, the securities representing participation with substantial influence are not overvalued at the fair 
market value.  
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
Goodwill is deductible only in cases relating to the purchase of the company. Goodwill is the 
difference between the purchase price and the value of individual items of property valued by an 
expert.  
In the case of a positive valuation difference it is possible to amortize by successive reducing the tax 
base, in the case of a negative valuation difference by successive increasing the tax base, in both cases 
evenly spread over a period of 180 months (Section 23 subsection 15) 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

The Czech Republic does not apply CFC type legislation. 
 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
 
Please indicate. 
¾  A "low-or-no-tax" test? Please 
 
indicate. 
¾  An activities based test? Please 
 
indicate. 
¾  An income based test? Please 
 
indicate. 
Page 23 of 110 
 

Annex 2 
¾  Any other test? Please indicate. 
 
¾  Is there a layer limitation in the 
 
CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes   
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please 
explain. 

¾  Do you provide advance clearance   
on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

The Czech Republic applies the rules of transfer pricing and substance over form. 
 
*   Income Taxes Act (Zákon o daních z příjmů) No. 586/1992 Coll. 
** Section 19, subsection 3: 
For the purposes of this Act: 
a)  “company that is a tax resident in another EU Member State” shall mean a company that   is 
not a taxpayer referred to in section 17(3) and 
1.  takes one of the legal forms that are listed in the European Communities Directives and that 
are published by the  (Czech) Ministry of Finance in the Financial Bulletin and in the remote-
access information system, and 
2.  according to the tax laws of the EU Member States is considered as a tax resident and, under 
the terms of a double taxation agreement (treaty) concluded with a third State, is not 
considered as a tax resident outside the European Union, and 
3.  is subject to one of the taxes that are listed in the relevant European Communities Directives 
and that are similar in their nature to the (Czech) income tax. S list of the said taxes are 
published by the (Czech) Ministry of Finance in the Financial Bulletin and in the remote-
access information system. A company which is tax-exempt or may opt to be tax-exempt shall 
not be considered as a company being subject to such tax; 
b)  “parent company” shall mean a business entity that is a taxpayer referred to in section 17(3) 
and is in the legal form of a joint stock company or limited liability company or a cooperative, 
or a company (entity) that is a tax resident in another EU Member State, on condition that 
such a business company (entity) has a minimum shareholding of 10%in another company´s 
share capital for an uninterrupted period of at least 12 months; 
c)  “subsidiary shall mean a business entity that is a taxpayer referred to in section 17(3) and is in the 
legal form of a joint stock company or limited liability company or cooperative, or a company that is a 
tax resident in another EU Member State, on condition that the capital of such a business company 
(entity) includes a minimum shareholding of 10% owned by its parent company for an uninterrupted 
period of at least 12 months; 
Page 24 of 110 
 

Annex 2 
d) “a third State shall mean a State that is not a Member State of the European Union. 
Section 19, subsection 4: 
A tax exemption pursuant to subsection 1 (ze) to (zi) and subsection 9 may be claimed if the condition 
of a minimum shareholding of 10% in share capital is fulfilled even before the requirement of an 
uninterrupted period  of 12 months pursuant to subsection (3) is met provided that this requirement is 
subsequently fulfilled. Where the condition of having a minimum shareholding of 10 % in share 
capital for an uninterrupted period of at least 12 months is not (in future) fulfilled, tax exemption : 
  a) pursuant to subsection (1) (zf) to zi) claimed by a taxpayer referred to in section 17 (3) shall be 
considered as non-compliance with tax liability for a taxable period or period for which a tax return is 
filed and tax exemption has been claimed, 
  b) pursuant to subsection (1) (ze) to zh) claimed by a taxpayer shall be considered as non-compliance 
with tax liability and the procedure pursuant to section 38s shall be followed.  
 
------------------------------- 
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Annex 2 
06. DENMARK 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes 
 
1a. If yes: 
 
¾  Do you have a minimum 
Yes. There is a minimum participation requirement.  
participation requirement. Is this 
If the dividend-distributing company is a resident of 
different for domestic, EU, treaty 
Denmark or another Member State or another state with 
or 3rd country participations? 
which Denmark has a double taxation convention, it is a 
Please explain. 
condition that the Danish dividend-receiving company 
holds at least 10 per cent of the capital of the dividend-
distributing company. 
If the dividend-distributing company is a resident of 
another state, it is a condition that the income of this 
company is subject to Danish CFC-taxation, which 
demands that the Danish dividend-receiving company 
controls at least 50 per cent of the voting power of the 
foreign dividend-distributing company.   
A special anti-avoidance rule precludes that corporate 
shareholders which do not hold 10 per cent of the capital 
of the dividend-distributing company meet this 
requirement through a chain of interposed holding 
companies. Corporate shareholders are considered to be 
direct owners of shares of the dividend-distributing 
company even though they own shares in an interposed 
holding company (or a chain of interposed holding 
companies) which own the shares of the dividend-
distributing company. It is a condition that the shares of 
the interposed holding company are unlisted, that the 
primary function of this company is to own shares in 
subsidiaries, that this company has no genuine economic 
activity and that more than 50 per cent of this company is 
directly owned by entities which would not individually 
meet the 10 per cent ownership condition if the interposed 
company was disregarded. 
¾  Is there a minimum holding 
No 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
For foreign dividends it is a requirement, that the foreign 
"minimum effective taxation" 
distributing company – or another sub- subsidiary – has 
requirement? If yes, please 
not deducted the dividend payment at its company 
explain. 
taxation.   
¾  Does the "subject-to-tax" or 
The no deduction requirement also applies to a subsidiary 
"minimum effective taxation" 
on a lower level, unless there was a corresponding 
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Annex 2 
requirement apply to the 
taxation on a higher level than the subsidiary which 
subsidiary only or also to indirect 
benefitted from the deduction.  
subsidiaries. Please explain. 
¾  Is a tax credit for underlying taxes  In case the above requirements are not met, the receiving 
available in case one of the above 
Danish company is entitled to an ordinary credit for 
requirements is not met? Please 
underlying taxes.  
explain. 
 
1b. If no, please briefly explain your credit system. 
N.A. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes 
 
2a. If yes: 
 
¾  Is there a minimum participation 
Yes. There is a minimum participation requirement.  
requirement. Is this different for 
In case of alienation of shares in a company which is a 
domestic, EU, treaty or 3rd country  resident of Denmark or another Member State or another 
participations? Please explain. 
state with which Denmark has a double taxation 
convention, it is a condition that the alienating Danish 
company held at least 10 per cent of the capital of the 
dividend-distributing company. 
In case of alienation of shares in a company which is a 
resident of another state, it is a condition that the income 
of this company is subject to Danish CFC-taxation, which 
demands that the alienating Danish company controlled at 
least 50 per cent of the voting power of the foreign 
dividend-distributing company. 
A special anti-avoidance rule precludes that corporate 
shareholders which did not hold 10 per cent of the capital 
of the dividend-distributing company meet the 10 per cent 
requirement through a chain of interposed holding 
companies. As mentioned under 1.a.  
¾  Is there a minimum holding 
No 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
No 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  No 
available in case one of the above 
Page 27 of 110 
 

Annex 2 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

N.A. 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No  
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
N.A. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Yes 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
It is a requirement, that the foreign subsidiary is controlled 
Please indicate. 
by the Danish parent company which means that the 
Danish company holds more than 50 per cent of the voting 
Page 28 of 110 
 

Annex 2 
power of the subsidiary.  
¾  A "low-or-no-tax" test? Please 
No 
indicate. 
¾  An activities based test? Please 
No 
indicate. 
¾  An income based test? Please 
Yes. It is a requirement that the business of the foreign 
indicate. 
subsidiary is mainly of a financial nature. This means the 
fulfilment of two conditions. More than 50 per cent of the 
total taxable income of the subsidiary shall consist of net 
interest income, dividends, commissions, net capital gains 
on shares, payments and capital gains with respect to 
intellectual property rights, income from leasing or 
insurance activities etc. More than 10 per cent of the 
assets of subsidiary shall be of a financial nature.   
¾  Any other test? Please indicate. 
No 
¾  Is there a layer limitation in the 
No. The CFC-definition also applies to indirect 
CFC-definition (application to 
subsidiaries. 
indirect subsidiaries).  
¾  Is a tax credit for underlying taxes  Yes. Ordinary credit.  
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please 
explain. 

¾  Do you provide advance clearance  Yes.  
on the non-applicability of your 
Taxpayers may request for a binding advance ruling 
CFC provisions? If yes, please 
regarding the tax consequences of a specific transaction. 
explain via examples. 
These rulings are obtained from the tax authorities. 
However, a binding advance ruling is issued from the 
Taxation Board if the case may have consequences for a 
large number of taxpayers, involves a large amount of tax, 
involves interpretation of new legislation, involves EU 
law to a considerable extent or is of public interest. 
 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

N.A. 
 
_____________________ 
 
Page 29 of 110 
 

Annex 2 
07. ESTONIA 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes, on certain conditions. 
 
1a. If yes: 
 
¾  Do you have a minimum 
Yes. The minimum participation required is 10% in all 
participation requirement. Is this 
cases. 
different for domestic, EU, treaty 
or 3rd country participations? 
Please explain. 

¾  Is there a minimum holding 
No minimum holding period is required. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
There is a subject-to-tax requirement for 3rd country 
"minimum effective taxation" 
participations but not for EU/EEA participations. 
requirement? If yes, please 
explain. 

¾  Does the "subject-to-tax" or 
The subject-to-tax rule requires that the dividend or 
"minimum effective taxation" 
underlying profit has been taxed. It may have been taxed 
requirement apply to the 
on the level of the subsidiary or any of the indirect 
subsidiary only or also to indirect 
subsidiaries. 
subsidiaries. Please explain. 
¾  Is a tax credit for underlying taxes  When the requirements of the participation exemption are 
available in case one of the above 
not met, the taxpayer may deduct from income tax payable 
requirements is not met? Please 
(upon distribution of profits) the income tax paid on or 
explain. 
withheld from the dividend abroad, up to the amount of 
Estonian tax due. 
Underlying credit is available under some Estonian tax 
treaties. In that case where a company that is a resident of 
Estonia receives a dividend from a company that is a 
resident of the other Contracting State  in which it owns at 
least 10 per cent of its shares having full voting rights, the 
tax paid in the other Contracting State  shall include not 
only the tax paid on the dividend, but also the tax paid on 
the underlying profits of the company out of which the 
dividend was paid. 
 
1b. If no, please briefly explain your credit system. 
– 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
Page 30 of 110 
 

Annex 2 
conditions are met? 
No. 
 
2a. If yes: 
 
¾  Is there a minimum participation 
– 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? 
– 
Is this different for domestic, EU, 
treaty or 3rd country participations? 
Please explain. 

¾  Is there a "subject-to-tax" or 
– 
"minimum effective taxation" 
requirement? If yes, please explain. 

¾  Is a tax credit for underlying taxes 
– 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Capital gains are taxed as ordinary profits (upon distribution). 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No, as only distributed profits are taxed. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
No. 
 
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Annex 2 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No. 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Not to companies. Estonia only applies CFC legislation to resident individuals (participating in a 
CFC). Our corporate income tax system is based on taxation of distributions and no unrealised gains 
are included in the tax base. 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? Please  – 
indicate. 
¾  A "low-or-no-tax" test? Please 
– 
indicate. 
¾  An activities based test? Please 
– 
indicate. 
¾  An income based test? Please indicate.  – 
¾  Any other test? Please indicate. 
– 
¾  Is there a layer limitation in the CFC-
– 
definition (application to indirect 
subsidiaries).  

¾  Is a tax credit for underlying taxes 
– 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance on  – 
the non-applicability of your CFC 
provisions? If yes, please explain via 
examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

No specific rules. 
 
_____________________ 
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Annex 2 
08. FINLAND 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes. 
 
1a. If yes: 
 
¾  Do you have a minimum 
As a rule, a dividend received by a corporation is tax-
participation requirement. Is this 
exempt, .i.e. there is no participation requirement.  In 
different for domestic, EU, treaty 
cases where a dividend falls outside the scope of the tax 
or 3rd country participations? 
exemption for corporations, thus being partially taxable 
Please explain. 
income, a participation exemption applies to EU 
participations with the minimum holding of 10 %. In tax 
treaties the minimum participation requirement may vary, 
but is usually 10 %. No participation exemption in regard 
to participations in companies residing in 3rd countries 
with which there is no tax treaty. 
¾  Is there a minimum holding 
No. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
No.  
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Does the "subject-to-tax" or 
N/A. 
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  No. Ordinary credit is available with carry forward for 5 
available in case one of the above 
years.   
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
If the requirements for the participations exemption are not fulfilled and the dividend is wholly or 
partially tax liable, a tax credit can usually be granted. This takes place either according to the tax 
treaty, in situations where a tax treaty exists, and according to domestic legislation in non-treaty 
situations.   
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes, a tax exemption is available for capital gains derived from transfer of shares held in the fixed 
Page 33 of 110 
 

Annex 2 
assets of the company. 
 
2a. If yes: 
 
¾  Is there a minimum participation 
Yes, minimum participation requirement is 10 %. The 
requirement. Is this different for 
requirement is same for domestic, EU and treaty 
domestic, EU, treaty or 3rd country  participations. Exemption does not apply to 3rd country 
participations? Please explain. 
participation in non-treaty situations.  
¾  Is there a minimum holding 
Yes. Minimum holding period is one year immediately 
period? Is this different for 
preceding the transfer. The requirement is the same for 
domestic, EU, treaty or 3rd country  domestic, EU and treaty participations. Exemption does 
participations? Please explain. 
not apply to 3rd country participation in non-treaty 
situations. 
¾  Is there a "subject-to-tax" or 
No. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  No.  
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

In regard to the credit system, should the capital gains be wholly or partially tax liable, a tax credit can 
usually be granted. This takes place either according to the tax treaty, in situations where a tax treaty 
exists, or according to domestic legislation in non-treaty situations.   
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
In regard to capital gains, participation has relevance only in regard to transfer of shares held in the 
fixed assets of the company. If the conditions for the tax exemption are met, the capital loss is not 
deductible. If the requirement for minimum holding period is not fulfilled, a deduction for the capital 
loss is available and determined by deducting the amount of dividends received, group contributions 
and other corresponding items that have reduced the assets of the entity. However, the capital losses is 
not deductible if the entity either resides outside Finland, or is not a company referred to in Art 2 of 
the Parent-Subsidiary Directive or there is no tax treaty between Finland and the country in which the 
subsidiary resides. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
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Annex 2 
No. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
No. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No. In connection of the purchase of shares, the additional price relating to the goodwill is regarded to 
form a part of the acquisition price of the shares, which is deductible from the eventual selling price. 
Deduction for the depreciation of value of shares is not available.  
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Yes.  
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
Yes. A such test is the fact whether the foreign body is 
Please indicate. 
under the control of persons resident in Finland; this is the 
case if one or several such persons directly or indirectly 
own at least 50 per cent of the capital of or the voting 
rights in a CFC or they are entitled to at least 50 per cent 
of the yield of the net wealth of the CFC. 
¾  A "low-or-no-tax" test? Please 
Yes. In non-treaty situation the test is whether the foreign 
indicate. 
body has in its country of residence an actual rate of 
income tax which is less than 3/5 of the tax rate of a 
corporate body resident in Finland. In treaty situations, the 
test is whether the foreign body has in its country of 
residence an actual rate of income tax which is less than ¾ 
of the tax rate of corporate body resident in Finland. 
¾  An activities based test? Please 
Yes. Following bodies are not regarded as CFC: a) a 
indicate. 
corporate body whose income is mainly derived from 
industrial activities, any other comparable production 
activities or shipping business exercised in its country of 
residence; b) a corporate body whose income is mainly 
derived from sales and marketing activities exercised in 
and mainly directed to its country of residence. In 
addition, see below the actual economic activities test. 
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Annex 2 
¾  An income based test? Please 
No income type test. 
indicate. 
¾  Any other test? Please indicate. 
Yes. 
I) The CFC provisions are not applied to foreign corporate 
bodies resident in an EEA Member State or in a treaty 
partner State not on the so called grey list (see below), if: 
a) EU Directive concerning mutual assistance by the 
competent authorities of the Member States in the field of 
direct taxation and taxation of insurance premiums 
(77/799/EEC) is applicable to that State; or 
b) An agreement on exchange of information in tax 
matters between authorities has been concluded with that 
State and that agreement together with the internal 
legislation of the contracting States allows a sufficient 
exchange of information for the application of the Act on 
the Taxation of Shareholders in Controlled Foreign 
Companies. 
c) a further requirement is that the corporate body in 
question is actually established in the State where it is 
resident and carries on actual economic activity there.  
The requirement in c) is fulfilled if, taking into account 
the character of the activity:  
1. the corporate body has at its disposal in its State of 
residence necessary premises and assets for carrying on its 
activities; 
2. the corporate body has at its disposal in its State of 
residence sufficient staff with the authority to 
independently carry on its business; and 
3. that staff independently decides upon the day-to-day 
activities of that corporate body. 
 
 II) A foreign body is not regarded a CFC on the basis of 
tax treaty status, if 
a)  a corporate body is resident in a State with which 
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Annex 2 
Finland has an agreement for the avoidance of double 
taxation of income in force; 
b) the agreement is applicable to the profits of the 
corporate body provided that corporate bodies are in that 
State liable to pay for their profits a tax that doesn’t 
significantly deviate from the tax that corporate bodies 
must pay in Finland for their profits; and 
c)  the corporate body has not profited from the specific 
tax relief legislation of that State. 
The Ministry of Finance issues a decree containing a list 
on those tax treaty states where the tax is regarded to 
significantly deviate from the tax which corporate bodies 
must pay in Finland (grey list). 
¾  Is there a layer limitation in the 
Applies also to the indirect subsidiaries. A foreign body is 
CFC-definition (application to 
regarded to be under control of persons resident in Finland 
indirect subsidiaries).  
if one or several such persons directly or indirectly own at 
least 50 per cent of the capital of or the voting rights in a 
CFC or they are entitled to at least 50 per cent of the yield 
of the net wealth of the CFC. 
¾  Is a tax credit for underlying taxes  Yes. The shareholder of a CFC is entitled to credit the tax 
available in case your CFC rules 
of the CFC against the tax imposed by virtue of the CFC 
trigger immediate taxation of non-
rules. The tax credit is available for the state tax having 
distributed income? Please 
been imposed to the CFC in its State of residence or in a 
explain. 
third country. In a treaty situation, all such taxes are 
eligible for tax credit which according to the tax treaty 
would have been eligible for tax credit, had the 
shareholder resident in Finland been liable to pay such tax. 
If the credit cannot be granted in full, the un-credited part 
of the tax can be  deducted from the income tax during the 
subsequent five tax year if the taxpayer so claims. 
¾  Do you provide advance clearance  The normal procedure of issuing advance rulings on tax 
on the non-applicability of your 
matters based on the requests of tax payers is applicable. 
CFC provisions? If yes, please 
The taxpayer submits an application for an advance ruling 
explain via examples. 
to the Central Board of Taxation or to a tax office. In the 
application the taxpayer presents a question or questions 
relating to the application of CFC legislation, to which the 
advance ruling takes a stand that is binding to the tax 
authorities.  
 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 


 
 
_____________________ 
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Annex 2 
09. FRANCE 
 
 
 
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Annex 2 
10. GERMANY 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

[yes] 
 
1a. If yes: 
 
¾  Do you have a minimum participation  [no] 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? 
[no] 
Is this different for domestic, EU, 
treaty or 3rd country participations? 
Please explain. 

¾  Is there a "subject-to-tax" or 
[no] 
"minimum effective taxation" 
requirement? If yes, please explain. 

¾  Does the "subject-to-tax" or 
[N/A] 
"minimum effective taxation" 
requirement apply to the subsidiary 
only or also to indirect subsidiaries. 
Please explain. 

¾  Is a tax credit for underlying taxes 
[N/A] 
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
[N/A] 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
[yes] 
 
2a. If yes: 
 
¾  Is there a minimum participation 
[no] 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? 
[no] 
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Annex 2 
Is this different for domestic, EU, 
treaty or 3rd country participations? 
Please explain. 

¾  Is there a "subject-to-tax" or 
[no] 
"minimum effective taxation" 
requirement? If yes, please explain. 

¾  Is a tax credit for underlying taxes 
[N/A] 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

[N/A] 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
[No] 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
[No] 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
[No] 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
[no] 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign (sub) 
subsidiaries)?  

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Annex 2 
Yes 
 
7a. If yes, does the definition of a 
 
CFC contain: 
¾  A minimum shareholding 
Yes, more than 50% of the shares must be owned directly or 
test? Please indicate. 
indirectly by residents (individuals or other).  
If a foreign company’s income consists largely of investment 
income (other than dividends), then the threshold is 1 % 
shareholding or even less.  
¾  A "low-or-no-tax" test? Please  Yes, effective tax burden less than 25% based on the CFC’s 
indicate. 
income being calculated under German rules. 
¾  An activities’ based test? 
Yes. Any income of the CFC is subject to CFC rules unless 
Please indicate. 
derived from activities described in the statute. 
¾  An income based test? Please 
No. 
indicate. 
¾  Any other test? Please 
No. However, if the foreign company has either its seat or its 
indicate. 
place of effective management in a member state of the 
European Economic Area CFA, CFC rules shall not be applied 
if the taxpayer can proof that the foreign company carries on a 
real economic activity. This rule is a consequence of the ECJ 
decision C-196/06 (Cadbury-Schweppes)
¾  Is there a layer limitation in 
No. Tainted income of lower tier subsidiaries is covered as 
the CFC-definition 
long as more than 50 % of the shares of lower tier subsidiaries 
(application to indirect 
are owned directly or indirectly by residents. However, in 
subsidiaries).  
order to avoid multiple inclusion of income, dividends are not 
treated as income subject to CFC. Also, gains from the 
disposition of shares in a CFC are in most cases not treated as 
tainted income. 
¾  Is a tax credit for underlying 
Yes. Taxes born by the CFC are either deductible from the 
taxes available in case your 
income attributed to the resident shareholder or may be 
CFC rules trigger immediate 
credited against the shareholder’s tax.  
taxation of non-distributed 
income? Please explain. 

¾  Do you provide advance 
No 
clearance on the non-
applicability of your CFC 
provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

N/A 
 
_____________________ 
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Annex 2 
11. GREECE 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Unofficial translation: 
 
According to our national legislation (Income Tax Code), we can distinguish the following cases: 
Dividends from associated companies of Member States of the European Union 
According to the provisions of point ia’ of paragraph 1 of Article 103 of Income Tax Code (Law 
2238/1994), which were added with paragraph 13 of Article 14 of Law 3943/2011, it is provided that 
the profits received by domestic corporations (S.A.s) and limited liability companies, from companies 
established in another Member State of the EU, in which they participate in the meaning of Article 11 
of Law 2578/1998 (which incorporated the Parent-Subsidiary Directive 90/435/EEC), are tax exempt 
provided that they appear in a reserve account. 
If this reserve or part of it is distributed or capitalized, a withholding tax of 25% is effected. 
Furthermore, according to the provisions of point a’ of paragraph 2 of Article 8a of Law 2578/1998, it 
is specified that the provisions of Articles 8 through 11 of Law 2578/1998 apply to profits received by 
domestic companies listed in Article 101 and paragraph 4 of Article 2 of the Income Tax Code, 
because of their participation in subsidiary companies whose head office is in another Member State 
of the European Union (question 1a). 
In more detail, according to the provisions of the first paragraph of article 11 of Law 2578/1998, the 
provisions of articles 8 to 10 of the same law do not apply in case that the parent national company 
does not retain for two (2) consecutive years the participation percentage required by point c’ of article 
9 of the same law (at least 10% from 1st January 2009 and onwards). (question 1a). 
Taking into account all the above mentioned, the exemption to inbound dividends from associated 
companies of Member States of the EU is applied only when the requirements of the Directive 
90/435/EEC are met and there is no “subject-to-tax” or “minimum effective taxation” requirement. 
(question 1a). 
In case that the requirements of the Directive 90/435/EC are not met (for example participation below 
10%, retaining of the participations less than 2 years), in the inbound dividends from associated 
companies of Member States of the EU a withholding tax of 25% is effected, according to the 
provisions of article 54 (par. 6 point d’) or article 55 of Income Tax Code, as appropriate, without 
prejudice to the provisions of the Double Taxation Agreements.  
These dividends are subject to income taxation under the general tax provisions, adding up all other 
relevant income of the companies. The tax withheld under the provisions of article 54 or 55, the tax of 
the foreign legal entity or the tax withheld in these dividends abroad in all levels is credited. (question 
1a).
  
 
Dividends from associated companies of third countries 
In the inbound dividends from associated companies of third countries, a withholding tax of 25% is 
effected, according to the provisions of article 54 (par. 6 point d’) or article 55 of Income Tax Code, as 
appropriate, without prejudice to the provisions of the Double Taxation Agreements. These dividends 
are subject to income taxation under the general tax provisions, adding up all other relevant income of 
the companies. The tax withheld under the provisions of article 54 or 55, the tax of the foreign legal 
entity or the tax withheld in these dividends abroad up to the level of the subsidiary of the foreign 
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Annex 2 
company abroad in all levels is credited. (question 1a). 
Dividends from associated domestic companies  
Under the provisions of paragraph 1 of Article 54 and point d’ of paragraph 1 of Article 55 of the 
Income Tax Code, profits distributed by domestic corporations (S.A.s) and limited liability companies 
in other S.A.s or limited liability companies are subject to a withholding tax of 25%. With this 
witholding tax, the tax liability of the recipient entity ends for these dividends. In case the recipient 
entity makes a distribution of profits and its income includes income from its participation to another 
legal entity, from the tax obliged to pay with the tax return, the part of the tax that has already been 
withheld on its part and relates to the distributed by it profits that origin from the above mentioned 
participations is credited.  
 
1a. If yes: 
 
¾  Do you have a minimum participation 
[reply] 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? Is 
[reply] 
this different for domestic, EU, treaty or 
3rd country participations? Please 
explain. 

¾  Is there a "subject-to-tax" or "minimum  [reply] 
effective taxation" requirement? If yes, 
please explain. 

¾  Does the "subject-to-tax" or "minimum 
[reply] 
effective taxation" requirement apply to 
the subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes 
[reply] 
available in case one of the above 
requirements is not met? Please explain. 

 
1b. If no, please briefly explain your credit system. 
[reply] 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Unofficial translation 
The provisions of our domestic law (Article 13 of Income Tax Code) do not provide for an exemption 
for gains on the disposal of participations held by a domestic company to other companies (domestic 
and foreign). 
 
2a. If yes: 
 
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Annex 2 
¾  Is there a minimum participation 
[reply] 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? 
[reply] 
Is this different for domestic, EU, 
treaty or 3rd country participations? 
Please explain. 

¾  Is there a "subject-to-tax" or 
[reply] 
"minimum effective taxation" 
requirement? If yes, please explain. 

¾  Is a tax credit for underlying taxes 
[reply] 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Unofficial translation 
The goodwill of gains on the disposal of participations held by a domestic company to other 
companies (domestic and foreign) is taxed in principle with a specific rate, depending on the type of 
participation (eg shares or units of limited liability companies) and furthermore, any profit is subject to 
taxation according to the general income tax provisions.  
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Unofficial translation 
Assuming that the realized capital loss from participations is a loss from a transfer of participations or 
from liquidation of the company, of which the participations are held, we note the following: 
As regards the participations of domestic companies to other domestic corporations (S.A.s), the loss 
arising from their transfer is transferred to a special reserve account which is formed from the sale of 
shares listed on the Athens Stock Exchange and any uncovered amount is not deductible from the 
gross income (Article 38 of Income Tax Code). The loss from the liquidation of a domestic company 
is recognized for deduction from the gross income of the company that holds participations in it. 
Furthermore, the loss resulting from the transfer of participations of a foreign company as well as its 
liquidation, is not recognized as a deduction from the gross income, as a negative item of income from 
sources located abroad is only credited with positive income of the taxpayer that incurs abroad (Article 
4 of Income Tax Code). 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 

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Annex 2 
provision). 
Unofficial translation 
Assuming that the unrealized loss from participations is a loss from valuation, we note that according 
to the provisions of Article 38 of Income Tax Code, the loss from the evaluation of participations in 
domestic companies has the same tax treatment as the loss from the sale of unlisted shares, as 
discussed above (transfer to the debit of the special reserve account) (see question 3). Respectively, the 
loss from the evaluation of participations in foreign companies, is not recognized, as mentioned above 
(see question 3). 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
Unofficial translation 
We would like to reserve our right to reply, after the clarification of the rule/methodology of 
“recapture rule”.  
 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
Unofficial translation 
There is no corresponding tax treatment based on our internal legislation. 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Unofficial translation 
Our national legislation does not provide for CFC rules.  
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? Please  [reply] 
indicate. 
¾  A "low-or-no-tax" test? Please 
[reply] 
indicate. 
¾  An activities based test? Please 
[reply] 
indicate. 
¾  An income based test? Please indicate.  [reply] 
¾  Any other test? Please indicate. 
[reply] 
Page 45 of 110 
 

Annex 2 
¾  Is there a layer limitation in the CFC-
[reply] 
definition (application to indirect 
subsidiaries).  

¾  Is a tax credit for underlying taxes 
[reply] 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance on  [reply] 
the non-applicability of your CFC 
provisions? If yes, please explain via 
examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Unofficial translation 
We believe that the exchange of information can be an alternative anti-avoidance rule to ensure that 
profits artificially diverted which may give rise to foreign source dividends are appropriately taxed, 
when the recipient of the profits is an intermediate company and not the real beneficiary, taking into 
account that several member states do not provide for CFC rules.  
 
 
----------------------------- 
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Annex 2 
12. HUNGARY 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

As for Hungary the dividends are exempt from corporate income tax, except for the dividends received 
from controlled foreign companies. 
 
1a. If yes: 
 
¾  Do you have a minimum 
No. 
participation requirement. Is this 
different for domestic, EU, treaty 
or 3rd country participations? 
Please explain. 

¾  Is there a minimum holding 
No. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
Yes, as form 1 of January 2012 the definition of dividend 
"minimum effective taxation" 
was introduced, which reads as follows: Dividend is an 
requirement? If yes, please 
amount accounted as such under the accounting regulation 
explain. 
provided that the entity paying the amount does not 
account it as an expense deducted from its pre-tax profit. 
¾  Does the "subject-to-tax" or 
No difference. 
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  No. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
Withholding tax can only be credited if the definition of dividend is met. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes, Hungary provides for an exemption of capital gains on participations.  
In general capital gains of companies are treated as ordinary income and taxed accordingly. From 1 
January 2007, a participation exemption regime was introduced which exempts the disposal of 
'reported participations' from corporate income tax. A reported participation is one of at least 30% in 
the capital of the relevant company, except for CFCs. The exemption only applies to participations 
acquired on or after 1 January 2007 and held for at least one year. (for further details please see our 
Page 47 of 110 
 

Annex 2 
replies below). 
 
2a. If yes: 
 
¾  Is there a minimum participation 
Yes, Hungary has a minimum participation requirement of 
requirement. Is this different for 
30 per cent (registered share). Hungary’s ‘registered 
domestic, EU, treaty or 3rd country  share’ rule applies to a share of at least 30 per cent (and 
participations? Please explain. 
above, except for the increase of the value of the 
registered share) in the capital of a legal person or 
business association lacking the legal status of a legal 
person established according to Hungarian laws, and in 
any foreign person (other than a CFC)
, provided that the 
taxpayer notifies the tax authority concerning the 
acquisition of this share within sixty days. The sixty days 
deadline is mandatory (if the taxpayer fails to submit the 
notification is time it is not a possible to replace it). 
Notification of a share above 30 per cent may be 
submitted only if the taxpayer has previously notified his 
share of at least 30 per cent to the tax authority. On the 
basis of this rule the minimum participation requirement 
does not differ in the case of domestic, EU or third 
countries.  
¾  Is there a minimum holding 
The pre-tax profit of the taxpayer might be deducted with 
period? Is this different for 
the capital gains from the sale of a registered share shown 
domestic, EU, treaty or 3rd country  for the tax year, furthermore, in connection with registered 
participations? Please explain. 
shares, the capital gain claimed for the tax year due to the 
retiring of notified shares from the records shown as non-
monetary, in-kind contributions in excess of the amount of 
expenses claimed, on condition that that the taxpayer 
(including any predecessor) has shown the share in 
question under his assets for at least one year previously. 
On the basis of this rule the minimum holding period does 
not differ in the case of domestic, EU or third countries. 
¾  Is there a "subject-to-tax" or 
No. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  No. If the abovementioned requirements are not met the 
available in case one of the above 
taxpayer is supposed to pay the tax in relation to its shares 
requirements is not met? Please 
according to the general rules.  
explain. 
 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 


 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
Page 48 of 110 
 

Annex 2 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No, in the case of registered shares the pre-tax profit shall be increased by the capital losses claimed 
for the tax year under expenses, and any expenses claimed due to the retiring of shares from the 
records for any reason (other than settlement in connection with transformation) in excess of the 
amount of income claimed. 
 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
Unrealised foreign exchange loss is deductible temporarily.  
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
Yes, the pre-tax profit shall be increased with any capital loss (and the value adjustments) shown 
under expenses for the tax year in connection with the shares in a controlled foreign company, and the 
part of expenses resulting from the retirement of such shares for any reason, that is in excess of the 
income accounted. 
 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
In the case of goodwill of acquired participations the loss in value is deductible for corporate income 
tax purposes. 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Yes, Hungary applies CFC-type legislation according to Paragraph 4. Point 11. of Act LXXXI of 1996 
on Corporate Tax and Dividend Tax. 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
For the purposes of CFC provision, beneficial owner shall 
Please indicate. 
mean a private individual who controls - directly or 
indirectly - at least ten per cent of the voting rights or the 
capital of the nonresident company, or has a dominant 
Page 49 of 110 
 

Annex 2 
influence by definition of the Civil Code of Hungary. 
¾  A "low-or-no-tax" test? Please 
If the quotient of the tax amount paid (payable) by the 
indicate. 
nonresident company for the tax year - less any tax refund 
- and the tax base [in the case of group taxation 
arrangement the amount of tax paid (payable) at group 
level, less any tax refund, and the tax base] is less than 10 
per cent or the nonresident company did not pay any tax 
equivalent to corporate tax on account of its tax base being 
zero or negative, even though it has made a profit. 
If the balance sheet total or the tax base is zero or 
negative, the amount of the tax equivalent to corporate tax 
according to the laws of the foreign state shall reach 10 
per cent. 
¾  An activities based test? Please 
Real economic presence means when a nonresident 
indicate. 
company is engaged in gainful activities in another state - 
together with its affiliates established in that state, where 
applicable -, such as in manufacturing, processing, 
agricultural, service, investment and trading activities, 
using its own equipment and own workforce, where their 
revenues from such activities represent at least 50 per cent 
of all revenues; burden of proof of the said real economic 
presence shall lie with the taxpayer. 
¾  An income based test? Please 
Controlled foreign company shall mean nonresident 
indicate. 
company whose revenues for the tax year originate from 
Hungary for the most part. 
¾  Any other test? Please indicate. 
Controlled foreign company shall mean foreign persons 
and nonresident entities whose head office is located 
abroad (hereinafter referred to as “nonresident company”), 
in which there is a beneficial owner who is considered a 
resident according to the Personal Income Tax Act 
concerning the majority of the nonresident company’s tax 
year. 
¾  Is there a layer limitation in the 
No. But CFC provisions shall apply to any fixed 
CFC-definition (application to 
establishment of the nonresident company located in a 
indirect subsidiaries).  
state other than where the said company is established or 
in which it is a resident. 
¾  Is a tax credit for underlying taxes  No. 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please 
explain. 

¾  Do you provide advance clearance  CFC provisions shall not apply if the nonresident 
on the non-applicability of your 
company in question is established or is a resident of a 
CFC provisions? If yes, please 
Member State of the European Union, a Member State of 
explain via examples. 
the OECD, or a State with which the Republic of Hungary 
has an agreement on double taxation and in which state 
the said nonresident company maintains real economic 
presence. 
Real economic presence means when a nonresident 
Page 50 of 110 
 

Annex 2 
company is engaged in gainful activities in another state - 
together with its affiliates established in that state, where 
applicable -, such as in manufacturing, processing, 
agricultural, service, investment and trading activities, 
using its own equipment and own workforce, where their 
revenues from such activities represent at least 50 per cent 
of all revenues; burden of proof of the said real economic 
presence shall lie with the taxpayer. 
Any nonresident company in which a person that is listed 
on a recognized exchange for a period of not less than five 
years effective on the first day of the tax year, or its 
affiliated company holds a share of at least 25 per cent on 
each day of the tax year shall not be recognized as a 
controlled foreign company. 
 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Hungary applies CFC-type legislation according to Paragraph 4. Point 11 of Act LXXXI of 1996 on 
Corporate Tax and Dividend Tax. 
 
 
------------------------- 
 
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13. IRELAND 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

No.  
The sole exemption is in the case of portfolio investor companies (companies with a holding or voting 
rights of less than 5 per cent) where the dividends form part of the trading income of the company. 
This limited exemption for inbound dividends was provided in 2010 to ensure parity of treatment with 
Irish-source dividends received by insurance companies.  
 
1a. If yes: 
 
¾  Do you have a minimum participation  Not applicable 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? 
Not applicable 
Is this different for domestic, EU, 
treaty or 3rd country participations? 
Please explain. 

¾  Is there a "subject-to-tax" or 
Not applicable 
"minimum effective taxation" 
requirement? If yes, please explain. 

¾  Does the "subject-to-tax" or 
Not applicable 
"minimum effective taxation" 
requirement apply to the subsidiary 
only or also to indirect subsidiaries. 
Please explain. 

¾  Is a tax credit for underlying taxes 
Not applicable 
available in case one of the above 
requirements is not met? Please 
explain. 

1b. If no, please briefly explain your credit system. 
Credit is given for tax paid by 5 per cent (minimum – by reference to voting rights) subsidiaries and 
sub-subsidiaries, whether withholding tax on the dividends or a proportion of the direct tax paid on the 
underlying profits from which the dividends were paid. The set-off of credit in any period cannot 
exceed the Irish corporation tax on the dividends. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes 
Where the conditions are not met the capital gains are subject to a specific capital gains tax or an 
equivalent amount of corporation tax. 
 
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Annex 2 
2a. If yes: 
 
¾  Is there a minimum participation 
There is a 5 per cent minimum participation requirement 
requirement. Is this different for 
in all cases— exemption applies to  domestic, EU and 
domestic, EU, treaty or 3rd country  Double Taxation Treaty-partner participations only. 
participations? Please explain. 
¾  Is there a minimum holding 
In all cases the participation must have been held for a 
period? Is this different for 
continuous period of 12 months ending within two years 
domestic, EU, treaty or 3rd country  prior to the date of disposal of the participation. 
participations? Please explain. 
¾  Is there a "subject-to-tax" or 
Exemption applies to domestic, EU and Double Taxation 
"minimum effective taxation" 
Treaty-partner participations only. 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  Where the gain on disposal is charged to Irish tax, credit is 
available in case one of the above 
given for tax on the gain paid in a Treaty partner country. 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Not applicable 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
Not applicable— please see answer at 4. above. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 

Page 53 of 110 
 

Annex 2 
deductible amount (write down, amortisation, provision). 
No 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No.  
Ireland does not have a general CFC regime. Immediate taxation is only applicable in the limited 
circumstances of capital gains arising on non-trading assets disposed of by foreign companies 
controlled by 5 or fewer Irish residents.  
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? Please 
Not applicable  
indicate. 
¾  A "low-or-no-tax" test? Please indicate.  Not applicable 
¾  An activities based test? Please 
Not applicable 
indicate. 
¾  An income based test? Please indicate. 
Not applicable 
¾  Any other test? Please indicate. 
Not applicable 
¾  Is there a layer limitation in the CFC-
Not applicable 
definition (application to indirect 
subsidiaries).  

¾  Is a tax credit for underlying taxes 
Not applicable 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance on 
Not applicable 
the non-applicability of your CFC 
provisions? If yes, please explain via 
examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Retaining the credit system of relief for foreign tax ensures appropriate taxation of foreign-source 
dividends representing profits repatriated to Ireland. 
 
 
_____________________ 
 
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Annex 2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
tible 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Annex 2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
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Annex 2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
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Annex 2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Annex 2 
15. LATVIA 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes 
 
1a. If yes: 
 
¾  Do you have a minimum 
Law “On Enterprise Income Tax” (hereinafter – EIT) 
participation requirement. Is this 
provides that dividends received from a resident of Latvia, 
different for domestic, EU, treaty 
other EU Member State or EEA state (with which tax 
or 3rd country participations? 
information can be exchanged under   agreement for the 
Please explain. 
avoidance of double taxation (DTA)), shall be exempted 
from taxation without any participation requirement. 
However, dividends received from a resident of the 3rd 
country shall be tax exempt only if the dividends are 
received from such a non-resident in which the recipient 
EIT taxpayer at the time of payment owns at least 25 per 
cent of the capital and voting rights, provided the payer of 
the dividends is not a resident in low tax or no tax country 
or territory listed in the regulations of the Cabinet of 
Ministers. 
As from January 1, 2013 dividends received from a 
resident of the 3rd country will be exempt from taxation 
without any participation requirement, but only if the 
payer of the dividends is not a resident of low tax or no 
tax country or territory listed in the regulations of the 
Cabinet of Ministers.  
¾  Is there a minimum holding 
No 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
No. In general it is assumed that dividends received from 
"minimum effective taxation" 
a non-resident company, other than that residing in a low 
requirement? If yes, please 
tax or no tax country or territory listed in the regulations 
explain. 
of the Cabinet of Ministers, have been paid out of profits 
that have been subjected to taxation.   
¾  Does the "subject-to-tax" or 
No 
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  In general credit for underlying foreign tax is not granted 
available in case one of the above 
under the provisions of EIT law. However, it is available 
requirements is not met? Please 
under certain number of concluded DTAs (in case of 
explain. 
participations of at least 10%). 
 
Page 60 of 110 
 

Annex 2 
1b. If no, please briefly explain your credit system. 
In respect of dividends, other than those exempt under the EIT provisions, double taxation is 
eliminated under the ordinary credit method on a per country basis.  
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
EIT law provides that capital gains derived from the alienation of securities which are under public 
circulation in the EU Member States or EEA States shall be exempt from taxation without any 
participation requirement.  
As from January 1, 2013 capital gains derived from the alienation of all kind of securities will be tax 
exempt without any participation requirement.  
However, this exemption shall not apply if the company, the securities of which are alienated is a 
resident in a low tax or no tax country or territory listed in the regulations of the Cabinet of Ministers. 
 
2a. If yes: 
 
¾  Is there a minimum participation 
No 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding 
No 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
No. However, exemption shall not apply in respect of 
"minimum effective taxation" 
capital gains from securities of companies resident in a 
requirement? If yes, please 
low tax or no tax countries or territories listed in the 
explain. 
regulations of the Cabinet of Ministers. 
¾  Is a tax credit for underlying taxes  No 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Capital gains are taxable as part of ordinary profits of recipient, except exempt gains mentioned in 2.   
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Until 1 January, 2013 losses from the alienation of securities (other than exempt securities under 
public circulation in the EU Member States or EEA States) may be covered only from the positive 
Page 61 of 110 
 

Annex 2 
taxable income from the alienation of such securities in a chronological sequence during the eight 
subsequent taxation periods following that of the alienation of such securities, but not exceeding the 
amount of the actual losses.  
However, the mentioned losses may be covered also from the other taxable income in a chronological 
sequence during the eight subsequent taxation periods if the taxpayer does not regularly performs such 
sales of securities (not more frequently than once in a taxation period) and the alienated securities have 
been owned by such a taxpayer for more than 12 months. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
No 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 

Please indicate. 
¾  A "low-or-no-tax" test? Please 

indicate. 
¾  An activities based test? Please 

indicate. 
¾  An income based test? Please 

indicate. 
¾  Any other test? Please indicate. 

Page 62 of 110 
 

Annex 2 
¾  Is there a layer limitation in the 

CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes 

available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance 

on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Under the EIT law provisions EIT taxpayers are obliged to withheld at source tax at the basic EIT tax 
rate of 15% from any payment paid to persons in low tax or no tax countries or territories listed by the 
Cabinet of Ministers, provided that such payments are deductible at the determination of taxable 
income of the EIT taxpayer. The State Revenue Service may allow not to withheld tax from such 
payments, provided, the taxpayer proves that the transactions with the person in the low tax or no tax 
country or territory have not been entered with a purpose to reduce the taxable income of the taxpayer 
( are based on real business activity).  
 
 
_____________________ 
 
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Annex 2 
16. LITHUANIA 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

According to Lithuanian Law on Corporate Income Tax (hereinafter - LCIT) we provide for an 
exemption of inbound intercompany dividends if certain conditions are met: 
“Dividends received by a Lithuanian entity from Lithuanian entities, in which the recipient controls 
for an uninterrupted period of at least 12 months, including the moment of distribution of the 
dividends, at least 10% of voting shares (interests, member shares), shall not be subject to corporate 
income tax and shall not be included in the income of the entity receiving the dividends (LCIT 33 
(2))” 
or 
“Dividends received by a Lithuanian entity or a permanent establishment for the shares, portion of 
capital or other rights held in or attributed to the permanent establishment foreign entities which are 
registered or otherwise organised in a state of the European Economic Area (hereinafter - EEA) and 
whose profit is subject to corporate income tax or an equivalent tax shall not be subject to taxation” 
(LCIT 35 (2)); 
or 
“Dividends received by a Lithuanian entity or permanent establishment from foreign entities, not 
specified in paragraph 2 of this Article, in which the Lithuanian or foreign entity whose permanent 
establishment (to which the dividend paying shares, portion of the capital or other rights are attributed) 
receives such dividends controls for an uninterrupted period of at least 12 months, including the 
moment of distribution of dividends, at least 10% of voting shares (interests, member shares), shall not 
be subject to taxation, provided that the dividends are received from a foreign entity whose profit is 
subject to corporate income tax or an equivalent tax and which is not registered or otherwise organised 
in target territories” (LCIT 35 (3)). 
 
1a. If yes: 
 
¾  Do you have a minimum 
There is a minimum participation requirement: at least 10% 
participation requirement. Is this 
of voting shares (interests, member shares). 
different for domestic, EU, treaty 
The requirement is applied to domestic entities and to the 
or 3rd country participations? 
entities which are not registered or otherwise organised in a 
Please explain. 
state of the EEA (LCIT 33 (2), 35(2) or LCIT 35 (3)). 
¾  Is there a minimum holding 
There is a minimum holding period: continuously for at 
period? Is this different for 
least 12 months. 
domestic, EU, treaty or 3rd 
The requirement is applied to domestic entities and to the 
country participations? Please 
entities which are not registered or otherwise organised in a 
explain. 
state of the EEA. (LCIT 33 (2), 35(2) or LCIT 35 (3)). 
¾  Is there a "subject-to-tax" or 
The exemption of inbound intercompany dividends is 
"minimum effective taxation" 
applicable (if the above-mentioned conditions are met) 
requirement? If yes, please 
when a foreign entity’s profit is subject to corporate income 
explain. 
tax or an equivalent tax (LCIT 35(2) or LCIT 35 (3)). 
¾  Does the "subject-to-tax" or 
The “subject to tax” requirement applies only to the 
"minimum effective taxation" 
subsidiaries (LCIT 33 (2), 35(2) or LCIT 35 (3)). 
requirement apply to the 
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subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying 
 “Where an entity distributes profits by paying dividends in 
taxes available in case one of the 
cash in accordance with the procedure laid down in the 
above requirements is not met? 
Law of the Republic of Lithuania on Companies, the Law 
Please explain. 
of the Republic of Lithuania on Cooperative Companies 
(Cooperatives) and the Law of the Republic of Lithuania on 
Agricultural Companies, the amount of the withheld 
corporate income tax shall be set off and reduce the amount 
of corporate income tax to be paid by the Lithuanian entity 
receiving the dividends for the tax period during which the 
tax on the dividends paid to it was withheld. Where in the 
tax period during which the tax on the dividends paid out 
was withheld and paid the amount of the offset tax 
withheld by the Lithuanian entity receiving the dividends 
exceeds the amount of corporate income tax to be paid by 
the entity, the difference between the two amounts shall be 
refunded (credited) in accordance with the procedure for 
refunding (crediting) of tax overpayment laid down in the 
Law on Tax Administration” (LCIT 33(3)). 
 
A Lithuanian entity may deduct the amount of corporate 
income tax or equivalent tax paid in a foreign country on 
income received in that country during the relevant fiscal 
year from the amount of corporate income tax calculated in 
accordance with the procedure laid down in LCIT (LCIT 
55(1)). 
 
1b. If no, please briefly explain your credit system. 

 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes, we provide for an exemption of capital gains on participation if certain conditions are met: 
“income from the increase in the value of assets resulting from transfer of shares of an entity registered 
or otherwise organised in a state of the EEA or in a state with which a treaty for the avoidance of 
double taxation has been concluded and brought into effect and which is a payer of corporate income 
tax or an equivalent tax, if the entity that transfers to another entity or natural person the shares held 
more than 25% of voting shares in that entity for an uninterrupted period of at least two years or if the 
transfer of shares was made in case of reorganization or alienation (referred to CIT 41(2) which is 
consistent with  EU directive 90/434/EC) – more than 25% of voting shares must be held an 
uninterrupted period of at least three years.  This relief shall not apply if the entity that transfers the 
shares transfers them to the entity that has issued the shares” (LCIT 12(15))”. 
 
2a. If yes: 
 
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Annex 2 
¾  Is there a minimum participation 
There is a minimum participation requirement: more than 
requirement. Is this different for 
25% of voting shares. 
domestic, EU, treaty or 3rd country  The requirement is applied to domestic, EEA and treaty 
participations? Please explain. 
participations (LCIT 12(15)). 
¾  Is there a minimum holding 
There is a minimum holding period: an uninterrupted 
period? Is this different for 
period of at least 2 years or if the transfer of shares was 
domestic, EU, treaty or 3rd country  made in case of reorganization or alienation (referred to 
participations? Please explain. 
LCIT 41(2) which is consistent with EU directive 
90/434/EC) - uninterrupted period of at least 3 years. 
The requirement is applied to domestic, EEA and treaty 
participations (LCIT 12(15)). 
¾  Is there a "subject-to-tax" or 
The exemption of capital gains on participations is 
"minimum effective taxation" 
provided (if the above-mentioned conditions are met) 
requirement? If yes, please 
when a foreign entity is a payer of corporate income tax or 
explain. 
an equivalent tax (LCIT 12(15)). 
¾  Is a tax credit for underlying taxes  No. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

In all other cases which are not above-mentioned (2a), capital gains are taxed as an ordinary profits in 
accordance with LCIT 16(1): 
“Income from the increase in the value of assets shall be income earned which comprises the 
difference between the price of the sale or other transfer into ownership of assets and the acquisition 
price of such assets.” 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Losses incurred as a result of transferring securities or derivative financial instruments shall be carried 
forward to the following fiscal year, however, such losses will cover only the income received from 
the transfer of securities and/or derivative financial instruments. Losses incurred as a result of 
transferring the shares of an entity registered or otherwise organised in a member state of the EEA or 
in a state with which a treaty for the avoidance of double taxation has been concluded and brought into 
effect and which is a payer of corporate income tax or an equivalent tax, if the entity that transfers the 
shares held more than 25% of voting shares in that entity for an uninterrupted period of at least two 
years shall be deducted from taxable income received from the transfer of securities during the tax 
period, but the amount of losses deducted in this manner can not exceed the amount of the increase in 
the value of assets of taxable securities during that tax period and the non-deducted amount of such 
losses shall not be carried forward to the following fiscal year (LCIT 30(2)). 
The methodology for calculating the loss: 
Income from the increase in the value of assets shall be income earned which comprises the difference 
between the price of the sale or other transfer into ownership of assets and the acquisition price of such 
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Annex 2 
assets (LCIT 16(1)). 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
No. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
Where all or one or more branches of activity of another entity in the form of its rights and obligations 
which from an organisational point of view constitute an independent economic entity engaged in 
activities and capable of functioning by its own means, are acquired, the accumulated value of 
goodwill shall be included in the deductions of limited amounts in a manner similar to fixed assets. 
Where the shares of another entity are acquired for the purpose of controlling its net assets and 
activity, the accumulated value of goodwill shall be included in the deductions of limited amounts in a 
manner similar to fixed assets only after subsequent merger of these entities or merger by acquisition 
of one entity by another, if any.  
There is 15 years period for amortisation of goodwill using the linear method.  
(LCIT 18(10),18(5) and the Appendix 1) 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Yes.  
The requirements for the application of CFC rules are presented down below.  
 
7a. If yes, does the definition of a 
 
CFC contain: 
¾  A minimum shareholding 
The shareholding test is related to the definition of controlled 
test? Please indicate. 
taxable entity (LCIT 2(4)).  
Controlled taxable entity (hereinafter referred to as the 
“controlled entity”) shall mean any entity deemed to be under 
the control of another entity or a resident of Lithuania 
(hereinafter referred to as the “controlling person”), provided 
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Annex 2 
that: 
1) it is controlled by the controlling person on the last day of the 
tax period, and 
2) the controlling person holds directly or indirectly over 50% 
of the shares (interests, member shares) in the controlled entity 
or other rights to a portion of distributable profits or pre-emptive 
rights to the acquisition thereof, 
3) the controlling person, together with related persons, holds 
over 50% of the shares (interests, member shares) in the 
controlled entity or other rights to a portion of distributable 
profits or pre-emptive rights to the acquisition thereof, and the 
portion controlled by the controlling person accounts for at least 
10% of the shares (interests, member shares) or other rights to a 
portion of distributable profits or pre-emptive rights to the 
acquisition thereof. 
¾  A "low-or-no-tax" test? 
In reference with LCIT 39(4 (1)), Minister of Finance order No. 
Please indicate. 
24, 24 January, 2002 (hereinafter – MFO 24) and Minister of 
Finance order No. 344, 22 December, 2001 (hereinafter – MFO 
344) CFC  rules shall be applied: 
1)  The controlled taxable entity is registered or otherwise 
organized  in the state listed in the MFO 344 (known as 
“Black list”) as a tax haven or
2)  The controlled taxable entity is registered or otherwise 
organized in the state listed in the MFO 24 (known as 
“White list”) but the form of business organization 
complies one of the foreign business organization forms 
which acquiring special corporate income tax or the 
equivalent tax exemptions under the law of the rezident 
State regulations or; 
3)  The controlled taxable entity is registered or otherwise 
organized in the state which is neither listed in “Black 
list” nor “White list” but where the corporate income 
tax rate is less than 75% of Lithuanian corporate income 
tax rate. 
¾  An activity based test? 
(LCIT 2(29) and Government ruling No. 517, 12 April, 2002). 
Please indicate. 
All income (known as positive income) received by a controlled 
entity, registered or otherwise organised in the countries or 
zones referred to in paragraph 4 of Article 39 of LCIT, or part of 
such income shall be included in the income of a controlling 
entity of Lithuania in proportion to the number of the shares 
(interests, member shares), votes or rights to the profits of the 
controlled entity held by the Lithuanian entity except 
controlled entity’s income received from active activity 
if: 
1)  in the foreign-controlled entity there are as many 
workers as foreign- controlled entity’s business 
normally requires, and  
2)  not more than 10% of foreign-controlled entity’s 
income per tax year is received from other than the state 
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Annex 2 
(or territory) where this entity is registered or otherwise 
organized, and 
3)  foreign-controlled entity’s income received from the 
transactions with unrelated persons is more than 50% of 
all foreign-controlled entity’s income per tax year. 
¾  An income based test? Please  According to LCIT 39 (5) CFC rules shall not be applied if: 
indicate. 
1)  the income of a controlled foreign entity comprises only 
the payments made by the controlling entity which are 
treated as non-allowable deductions or 
2)  the income of a controlled foreign entity comprises less 
than 5% of the income of the controlling entity. 
 
¾  Any other test? Please 
No. 
indicate. 
¾  Is there a layer limitation  In reference with the definition of controlled foreign entity, 
in the CFC-definition 
there is no difference between direct or indirect holding: 
(application to indirect 
“the controlling person holds directly or indirectly over 50% of 
subsidiaries).  
the shares (interests, member shares) in the controlled entity or 
other rights to a portion of distributable profits or pre-emptive 
rights to the acquisition thereof” LCIT 2(4). 
¾  Is a tax credit for 
According to LCIT 55 (6), (7): 
underlying taxes 
“6. A Lithuanian entity may deduct the amount of corporate 
available in case your 
income tax or equivalent tax paid in a foreign country on 
CFC rules trigger 
positive income received by a controlled entity in that country 
immediate taxation of 
during the relevant fiscal year, as specified in paragraphs 6 and 
non-distributed income? 
7 of Article 39 of LCIT, from the amount of corporate income 
Please explain. 
tax calculated in accordance with the procedure laid down in 
LCIT on the positive income included in the income of the 
Lithuanian entity. Deductions from the calculated amount of 
corporate income tax shall be allowed in accordance with the 
procedure laid down in this Article (LCIT 55) only where 
documents certified by the tax administrator of a foreign country 
have been issued concerning the income received in that country 
during the relevant fiscal year and the amount of corporate 
income tax or equivalent tax calculated and paid on that income 
and where the Lithuanian entity supplies the local tax 
administrator with the following information: 
1) the name of the controlled  entity and the address of its 
registered office; 
2) a list of its managers; 
3) the balance sheet and the profit and loss account; 
4) the amount of positive income attributed to income 
5) evidence of payment of taxes on positive income attributed to 
income. 
7. The Lithuanian entity shall submit the documents specified in 
paragraph 6 of this Article (55) in accordance with the 
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Annex 2 
procedure established by the central tax administrator.”  
and LCIT 39 (6),(7): 
“6. A Lithuanian entity shall have the right to reduce corporate 
income tax on the positive income included in its income, which 
is payable to the budget and calculated according to LCIT, by 
the amount of corporate income tax on the positive income of a 
controlled foreign entity included in the income of the 
Lithuanian entity, which was paid in a country or zone wherein 
the controlled foreign entity is registered or otherwise organised, 
in proportion to the number of the shares (interests, member 
shares), votes or rights to the profit of the controlled entity held 
by the Lithuanian entity. Where the tax paid in the said country 
or zone exceeds the amount provided for in the laws of that 
country or zone, the Lithuanian entity shall have the right to 
reduce corporate income tax on the positive income included in 
its income, which is payable to the budget and calculated 
according to LCIT, by the amount of tax on the positive income 
of a controlled foreign entity included in the income of the 
Lithuanian entity, which had to be paid in the country or zone 
wherein the controlled foreign entity is registered or otherwise 
organised. 
7. A Lithuanian entity shall have the right to reduce corporate 
income tax on the positive income included in its income of the 
Lithuanian entity, which is payable to the budget and calculated 
according to this Law, by the amount of corporate income tax 
on the positive income of a controlled foreign entity included in 
the income of the Lithuanian entity, which was paid in a foreign 
country with which the Republic of Lithuania has concluded a 
treaty for the avoidance of double taxation and the prevention of 
fiscal evasion and under the relevant law whereof the positive 
income of the controlled foreign entity is included in the income 
of the entity of that country and taxed subject to the rules 
analogous to those laid down in LCIT.” 
¾ Do you provide advance 
No. 
clearance on the non-
applicability of your CFC 
provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 


 
 
_____________________ 
 
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Annex 2 
17. LUXEMBURG 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes 
 
1a. If yes: 
 
¾  Do you have a minimum 
The recipient owns at least 10% of the share capital of the 
participation requirement. Is 
distributing company / entity or the acquisition cost of the 
this different for domestic, EU, 
shareholding is at least € 1.2 million. 
treaty or 3rd country 
The recipient: 
participations? Please explain. 
 a company / entity listed in annex I, part A of directive 
2011/96 UE resident in Luxembourg 
or a capital company not listed in the annex, but resident 
fully liable to tax in Luxembourg 
or a permanent establishment in Luxembourg of such a 
company / entity 
or a permanent establishment in Luxembourg of a capital 
company resident of a State where Luxembourg has a DTC 
or a permanent establishment of an EEE capital company or 
cooperative society. 
The payer: 
 a company / entity listed in annex I, part A of directive 
2011/96 UE 
or a resident fully liable to tax capital company not listed in 
the annex 
or a non resident capital company subject to a tax 
corresponding to Luxembourg corporation tax  
¾  Is there a minimum holding 
The recipient holds the minimum participation in the 
period? Is this different for 
distributing company for at least 12 months. 
domestic, EU, treaty or 3rd 
No differences in treatment. 
country participations? Please 
explain. 

¾  Is there a "subject-to-tax" or 
See answer in 1a. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Does the "subject-to-tax" or 
A corresponding income tax to Luxembourg corporation tax 
"minimum effective taxation" 
must be satisfied by the direct subsidiary. 3 criterions have to 
requirement apply to the 
be fulfilled: 
subsidiary only or also to 
1) a State tax 
indirect subsidiaries. Please 
explain. 

2) a comparable assessment basis 
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Annex 2 
3) a comparable tax rate (at least half of the rate of 
Luxembourg corporation tax). 
¾  Is a tax credit for underlying 
No 
taxes available in case one of the 
above requirements is not met? 
Please explain. 

 
1b. If no, please briefly explain your credit system. 
Luxembourg gives credit only for taxes paid by the taxpayer. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes 
 
2a. If yes: 
 
¾  Is there a minimum participation 
The holding represents at least 10% of the share capital of 
requirement. Is this different for 
the subsidiary or the acquisition cost of the shareholding is 
domestic, EU, treaty or 3rd country  at least € 6 million.  
participations? Please explain. 
Same companies / entities as under 1 a.. 
¾  Is there a minimum holding 
The recipient holds the minimum participation in the 
period? Is this different for 
distributing company for at least 12 months.  
domestic, EU, treaty or 3rd country  Same companies / entities as under 1 a.. 
participations? Please explain. 
¾  Is there a "subject-to-tax" or 
See 1 a. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  No 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

With companies / entities – generally as a business profit, in some cases as a capital gain, but 
Luxembourg does not apply a specific capital gains tax. 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
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Annex 2 
If a loss occurs when a shareholding is sold or otherwise alienated, this loss is tax deductible. The loss 
is computed by comparing the book value to the selling price. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
Unrealised capital losses are tax deductible, when there is a need to depreciate a shareholding (write 
down), however, if such a write down is linked to an exempt dividend, such a loss is not deductible. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
If in a subsequent year the value of the shareholding will increase the formerly incurred loss is 
recaptured for tax purposes, the same will apply if a shareholding is sold and where the capital gain is 
tax exempt  
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
n/a 
Please indicate. 
¾  A "low-or-no-tax" test? Please 
n/a 
indicate. 
¾  An activities based test? Please 
n/a 
indicate. 
¾  An income based test? Please 
n/a 
indicate. 
¾  Any other test? Please indicate. 
n/a 
¾  Is there a layer limitation in the 
n/a 
CFC-definition (application to 
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Annex 2 
indirect subsidiaries).  
¾  Is a tax credit for underlying taxes  n/a 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please 
explain. 

¾  Do you provide advance clearance  n/a 
on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Luxembourg applies a general anti-abuse rule which enables the tax authorities to requalify wholly 
artificial arrangements. The application of the concept of simulation allows the disregarding of 
pretended legal transactions for tax purposes. According to the concepts of substance over form and 
economic ownership, transactions in which the economic reality is not identical with the taxpayer’s 
choice would for tax purposes be classified based on the economic qualification.  
 
 
_____________________ 
 
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18. MALTA 
 
 
 
Page 75 of 110 
 

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19. NETHERLANDS 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes, participation exemption. 
 
1a. If yes: 
 
¾  Do you have a minimum 
Yes, 5%. No difference between domestic, EU, treaty or 
participation requirement. Is this 
3rd country participations. 
different for domestic, EU, treaty 
or 3rd country participations? 
Please explain. 

¾  Is there a minimum holding 
No. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
Yes, but only if the participation is held as a portfolio 
"minimum effective taxation" 
investment and if more than 50% of the assets of the direct 
requirement? If yes, please 
and indirect subsidiaries consists of passive investments. 
explain. 
¾  Does the "subject-to-tax" or 
Both direct and indirect subsidiaries. 
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  Yes. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
N/A. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes. 
 
2a. If yes: 
 
¾  Is there a minimum participation 
Yes, cf. 1a. 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 

Page 76 of 110 
 

Annex 2 
participations? Please explain. 
¾  Is there a minimum holding 
No. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
Yes, cf. 1a. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  Yes. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

N/A. 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Only upon liquidation (acquisition price minus liquidation proceeds). 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
N/A. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No. 
 
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Annex 2 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No. 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
[reply] 
Please indicate. 
¾  A "low-or-no-tax" test? Please 
[reply] 
indicate. 
¾  An activities based test? Please 
[reply] 
indicate. 
¾  An income based test? Please 
[reply] 
indicate. 
¾  Any other test? Please indicate. 
[reply] 
¾  Is there a layer limitation in the 
[reply] 
CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes 
[reply] 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance 
[reply] 
on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Mandatory annual revaluation of a shareholding in a passive investment subsidiary, profits arising, if 
any, will be taxed accordingly. Transfer pricing rules and general anti-avoidance rule (abuse of law). 
 
 
_____________________ 
 
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Annex 2 
20. POLAND 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

yes 
 
1a. If yes: 
 
¾  Do you have a minimum 
Dividends being paid in domestic transactions: dividends 
participation requirement. Is  paid in transaction between Polish residents are tax exempted if 
this different for domestic, 
the recipient directly holds no less than 10 per cent shares in the 
EU, treaty or 3rd country 
capital of paying company  
participations? Please 
Dividends being paid by EU resident: revenues earned by the 
explain. 
Polish residents, from dividends paid by legal persons whose 
registered office is located beyond the territory of the Republic 
of Poland, shall be free from tax if the recipient directly holds 
no less than 10 per cent shares in the capital of the paying 
company (the same applies to European Economic Area ) 
Treaty: generally dividends are taxed at the rate of 19%. 
However, this rate is applied taking into consideration DTAs in 
which Poland is a party. Application of the tax rate or refraining 
from tax collection under the relevant DTA shall be possible 
provided that the taxpayer documents his place of residence for 
tax purposes by "certificate of residence". 
Minimum participation requirement varies depending on 
specific DTA. (generally if such requirement exists it is 10%)  
¾  Is there a minimum holding 
Dividends being paid in domestic transactions: the exemption 
period? Is this different for 
shall apply where the company receiving payments holds shares 
domestic, EU, treaty or 3rd 
of the paying company for  
country participations? 
a period of two years without interruption. 
Please explain. 
Dividends paid by EU resident: the same rules apply to EU 
and EEA country participations. 
The abovementioned exemption shall also apply where the two-
year period of uninterrupted shareholding in the amount of 10 
percent lapses after the date of earning this income (revenue). 
Where the prerequisite to hold the shares in the amount 
specified above without interruption for a period of two years is 
not met, the company that applied the exemption shall submit a 
correction of the tax return for the tax years when it applied the 
exemption. 
Treaty: Minimum holding period varies depending on specific 
DTA regulations (2 year or there is no such requirement) 
¾  Is there a "subject-to-tax" or  Yes, there is. 
"minimum effective 
The payer of the dividend is a company which is subject to 
taxation" requirement? If 
taxation on the entirety of its income in  
yes, please explain. 
a European Union member state other than the Republic of 
Poland or in another state of the European Economic Area 
Page 79 of 110 
 

Annex 2 
regardless of where it is earned. 
The recipient is a company being a payer of income tax, having 
its registered office or management within the territory of the 
Republic of Poland and that company does not enjoy exemption 
from income taxation on the entirety of its income, regardless of 
where it is earned. 
¾  Does the "subject-to-tax" or  Direct only. 
"minimum effective 
taxation" requirement apply 
to the subsidiary only or also 
to indirect subsidiaries. 
Please explain. 

¾  Is a tax credit for underlying  No 
taxes available in case one of 
the above requirements is 
not met? Please explain. 

 
1b. If no, please briefly explain your credit system. 
Where Polish residents also earn income (revenues) beyond the territory of the Republic of Poland and 
this income is subject to taxation in a foreign state and in the tax settlement for a given tax year, this 
income (revenues) shall be combined with the income (revenues) earned within the territory of the 
Republic of Poland. In such a case, the calculated tax on the total amount of income shall be decreased 
by an amount equal to the tax paid in the foreign state. Nevertheless, the amount of deduction shall not 
exceed the part of tax calculated prior to making the deduction, that is proportionally attributable to the 
income earned in the foreign state. 
In the event where: 
1) a company having a legal personality, with its registered office or management within the territory 
of Poland, earns income (revenues) from dividends, as well as other revenues from participation in the 
profits of a legal person, and 
2) the income (revenues) referred to in point 1 are earned due to participation in the profits of a 
company subject to taxation on the entirety of its income, regardless of where it is earned, within the 
territory of a state bound with the Republic of Poland with an agreement in force for the avoidance of 
double taxation, where such state is not a European Union member state nor one belonging to the 
European Economic Area, nor is it the Swiss Confederation, and 
3) the company referred to in point1 directly holds no less than 75 per cent shares in the capital of the 
company referred to in point 2 
- a right to a deduction also applies to the amount of tax on the income in respect of which the profit 
has been paid, such amount of tax having been paid by the company referred to in point 2  in the state 
where its registered office is located - in the part corresponding with the share of the company referred 
to in point 1  in the profits paid out by the company referred to in point 2. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
yes  
 
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Annex 2 
2a. If yes: 
 
¾  Is there a minimum participation 
Similarly as in 1a. 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? Is 
Similarly as in 1a question 2. 
this different for domestic, EU, treaty or 
3rd country participations? Please 
explain. 

¾  Is there a "subject-to-tax" or "minimum  Similarly as in 1a question 3. 
effective taxation" requirement? If yes, 
please explain. 

¾  Is a tax credit for underlying taxes 
Similarly as in 1a question 5. 
available in case one of the above 
requirements is not met? Please explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No, except of sales of shares.  
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
no 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
In case of sales of shares, the loss may be carried forward for five tax years subsequent to the year in 
which it was suffered, however, in no single year of this period may the income be lowered in respect 
of such losses by an amount exceeding 50 per cent of the total amount carried forward. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 

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Annex 2 
deductible amount (write down, amortisation, provision). 
Amortisation of goodwill is possible if such goodwill arose as a result of acquisition of an enterprise 
or an organised part thereof by means of: purchase; adopting for paid use, whereas the depreciation 
write-downs are made by the user; contribution to the company under the regulations on 
commercialisation and privatisation. 
The initial value of goodwill shall be the positive difference between the price of acquisition of an 
enterprise or an organised part thereof or the nominal value of shares issued in exchange for a 
contribution in kind, and the market value of assets being part of the enterprise or of the organised part 
thereof that was purchased, adopted for use for consideration or contributed to the company - 
respectively from the date of purchase, of adoption for use for consideration or contribution to the 
company. 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No 
 
7a. If yes, does the definition of a CFC 
n/a 
contain: 
¾  A minimum shareholding test? Please 
n/a 
indicate. 
¾  A "low-or-no-tax" test? Please indicate. 
n/a 
¾  An activities based test? Please indicate. 
n/a 
¾  An income based test? Please indicate. 
n/a 
¾  Any other test? Please indicate. 
n/a 
¾  Is there a layer limitation in the CFC-
n/a 
definition (application to indirect 
subsidiaries).  

¾  Is a tax credit for underlying taxes 
n/a 
available in case your CFC rules trigger 
immediate taxation of non-distributed 
income? Please explain. 

¾  Do you provide advance clearance on the  n/a 
non-applicability of your CFC 
provisions? If yes, please explain via 
examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Transfer pricing rules. 
 
_____________________ 
Page 82 of 110 
 

Annex 2 
21. PORTUGAL 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes 
 
1a. If yes: 
 
¾  Do you have a minimum 
The minimum participation is: 
participation requirement. Is this 
 - 10%, for domestic and EU participations; and 
different for domestic, EU, treaty 
  -  in general, 25%, for treaty and third country  
or 3rd country participations? 
participations 
Please explain. 
¾  Is there a minimum holding 
The minimum holding period is: 
period? Is this different for 

one year for domestic and EU participations; and 
domestic, EU, treaty or 3rd country 
participations? Please explain. 


in general, two years for treaty or third country 
participations  
¾  Is there a "subject-to-tax" or 
Yes.  
"minimum effective taxation" 
1. Concerning domestic and EU participations, the 
requirement? If yes, please 
dividends qualify for the participation exemption regime 
explain. 
only when they are paid out of profits that have been  
subject to “effective taxation”. The domestic law does not 
provide any explicit indication of what is meant by 
“effective taxation”.  However, the tax authorities issued a 
“Circular” in order to clarify the concept of “effective 
taxation” for the purpose of the application of the 
participation exemption regime. Under this “Circular”, 
profits are considered to be subject to “effective taxation” 
when they:  
-  have been subject to and not exempt from Portuguese 
corporate income tax, or to a comparable foreign tax, and 
such taxation has actually been borne; however, a 
minimum level of taxation has not been defined;  
-  have been actually taxed at the level of the subsidiary 
distributing the profits or at any other lower tier subsidiary 
of the corporate structure; or  
-  refer to profits distributed by an EU subsidiary, which 
is subject to and not exempt from corporate income tax, as 
provided for in the Parent-Subsidiary Directive (90/435) 
of 23 July 1990.  
In addition, profits should be considered as having been 
subject to corporate income tax even if the entity 
distributing the profits has not paid any amount of tax, as a 
result from (i) offsetting of tax losses brought forward; (ii) 
tax deductions of a temporary nature (e.g. depreciation 
charge); or (iii) the use of tax credits.  
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Annex 2 
Finally, the “Circular” also considers that the general anti-
avoidance rule may be applicable on a case-by-case basis . 
In this sense, the participation exemption regime may be 
denied to artificially created corporate structures or 
interposed companies whose income that is subject to, and 
not exempt from tax, is:  
-  not significant when compared with the global amount 
of profits of the respective taxable period; or 

not derived from an effective economic activity of 
the company. 
2. Concerning treaty or 3rd country participations, the law 
establishes a minimum effective taxation requirement, i.e,  
the dividends must be  related to profits of the subsidiary 
that have been taxed at a rate of at least 10% and that are 
not derived from passive activities, namely (a) royalties, 
(b) capital gains, (c) other income related to securities, (d) 
income from immovable property situated outside the 
subsidiary’s state of residence or (e) banking and 
insurance income from operations not directed to that 
particular market 
 
¾  Does the "subject-to-tax" or 
The requirement of “effective taxation” can be met at any 
"minimum effective taxation" 
level of  the profits distribution chain, i.e., at the level of a 
requirement apply to the 
subsidiary or at the level of any sub-affiliated companies 
subsidiary only or also to indirect 
that contributed to the generation of those profits. 
subsidiaries. Please explain. 
¾  Is a tax credit for underlying taxes  NO 
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
N/A 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 

Holding companies qualify for a full exemption in respect of capital gains realized on the 
disposal of shares or other corporate rights held for at least 1 year. This does not, however, 
apply to capital gains on corporate rights that have been held for less than 3 years and were 
acquired from a related party or a resident of a listed tax haven.  

An exemption regime of capital gains is also applicable, with some exceptions, whenever the 
alienator is a non-resident entity . 
 
 
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Annex 2 
2a. If yes: 
 
¾  Is there a minimum participation 
No 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding 
The minimum holding period (one year) is only applicable 
period? Is this different for 
to the participations alienated by resident holding 
domestic, EU, treaty or 3rd country  companies.  
participations? Please explain. 
¾  Is there a "subject-to-tax" or 
No 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  No 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Whenever capital gains don’t benefit from an exemption, they are taxed as ordinary profits 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
The capital losses for tax purposes correspond to the difference between the proceeds from the 
disposal and the cost of acquisition adjusted in accordance with the indexation coefficient for the year 
of acquisition. 
Capital  losses are not deductible if the corporate rights (i) have been held for less than 3 years and 
were acquired from a related party or a resident entity subject to special tax regime; or (ii) are sold to a 
related party or a resident entity subject to a special regime of taxation; or the (iii) the alienation is 
made by a resident holding, under certain conditions. In the other cases, only 50% of the net capital 
loss incurred in the tax year on the sale of shares or other corporate rights is deductible.  
 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No 
 
 
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Annex 2 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
N/A 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
N/A 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Yes 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test?  A resident entity is deemed to have a substantial 
Please indicate. 
participation in a non-resident entity for  CFC purposes if 
it owns (directly or indirectly, including through an agent, 
a fiduciary or an interposed person):  

25% or more of its capital or voting rights or 
rights over income or property of  that entity ; or  

10% or more of its capital, or voting  rights or 
rights over income or property of  that entity 
where more than 50% of  its capital or voting 
rights or rights over income or property of  that 
entity is owned (directly or indirectly , including 
through an agent, a fiduciary or an interposed 
person) by resident entities. 
¾  A "low-or-no-tax" test? Please  The controlled foreign entity should be subjected to a 
indicate. 
privileged tax regime. This requirement is deemed to be 
verified in the following situations : 

The entity is resident in a low-tax jurisdiction 
included in the list approved by the Ministerial 
Order (Portaria) nº 292/2011 of 8 November 
2011, or. 

 The entity is resident in any country in which it is 
not taxed or it is taxed but the tax burden is equal 
to or less than 60% of the IRC paid if it were 
resident in Portugal. 
¾  An activities based test? Please  No attribution of profits will take place if the foreign 
indicate. 
entity meets the following conditions :  
-  at least 75% of its profits arise from local farming or 
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Annex 2 
manufacturing activities, or from commercial transactions 
mainly with the local market or not involving Portuguese 
residents; and  
-  its main activity is other than one of the listed activities 
(e.g. banking, certain types of insurance, holding or 
transfer of corporate rights or other securities).  
 
¾  An income based test? Please 
The resident controlling entity must include in its taxable 
indicate. 
income the after-tax profits of the non-resident controlled 
entity in proportion to its total direct or indirect 
participation.  
¾  Any other test? Please indicate.  No 
¾  Is there a layer limitation in 
No 
the CFC-definition 
(application to indirect 
subsidiaries).  

¾  Is a tax credit for underlying 
No. There is only a tax credit in respect of the foreign 
taxes available in case your 
withholding tax on dividends  paid by the controlled 
CFC rules trigger immediate 
entity. 
taxation of non-distributed 
income? Please explain. 

¾  Do you provide advance 
In theory, yes, under the general mechanism applicable to 
clearance on the non-
a binding information.  There are no practical examples.  
applicability of your CFC 
provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

N/A 
 
 
---------------------- 
 
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Annex 2 
22. ROMANIA 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes. 
 
1a. If yes: 
 
¾  Do you have a minimum 
Domestic – 0%. 
participation requirement. Is this 
EU – 10%. 
different for domestic, EU, treaty 
or 3rd country participations? 

Treaty – as it is provided in the treaty. 
Please explain. 
Third country – we don’t apply any exemption. 
¾  Is there a minimum holding 
Domestic – none. 
period? Is this different for 
EU – 2 years. 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

Treaty - as it is provided in the treaty. 
¾  Is there a "subject-to-tax" or 
No. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Does the "subject-to-tax" or 
No. 
"minimum effective taxation" 
 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  No. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
Not necessary. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
No. 
 
2a. If yes: 
 
¾  Is there a minimum participation 

requirement. Is this different for 
domestic, EU, treaty or 3rd country 

Page 88 of 110 
 

Annex 2 
participations? Please explain. 
¾  Is there a minimum holding 

period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 

"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

The capital gains are taxed as ordinary profits. 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Yes, we have a deduction available for realised capital losses concerning the participations and the 
loss is calculated as a difference between the sale price and the acquisition price. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
Yes, we have a deduction available for unrealised capital losses of participation through the 
depreciation rules. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
No, it is not subject to a recapture rule. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No. 
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Annex 2 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No. 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 

Please indicate. 
¾  A "low-or-no-tax" test? Please 

indicate. 
¾  An activities based test? Please 

indicate. 
¾  An income based test? Please 

indicate. 
¾  Any other test? Please indicate. 

¾  Is there a layer limitation in the 

CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes 

available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance 

on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

No. 
 
 
_____________________ 
 
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Annex 2 
23. SLOVAK REPUBLIC 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes. 
According to the Act No. 595/2003 Coll. on Income Tax as later amended (hereinafter only “Income 
Tax Act”) dividends paid out of profit of a company (whether Slovak company, or similar foreign 
company) to persons who participate in the company´s share capital (whether individuals, or legal 
entities), are not subject to tax in the Slovak Republic. This provision applies to dividends paid out of 
company profits generated since 2004. Dividends paid out of company profits generated before 2004 
are taxable income.  
Dividends are tax exempt in the Slovak Republic only if the distribution of dividends is made in 
compliance with the Business Code, i.e. the distribution is approved by the general meeting of 
shareholders, dividends are paid out of profit after tax etc. 
 
1a. If yes: 
 
¾  Do you have a minimum 
No. 
participation requirement. Is this 
As mentioned in answer to question 1, dividends are paid 
different for domestic, EU, treaty 
out by a company to persons who participate in the 
or 3rd country participations? 
company´s share capital (no minimum participation 
Please explain. 
requirement). 
¾  Is there a minimum holding 
No. 
period? Is this different for 
There are no special requirements other than those listed 
domestic, EU, treaty or 3rd country  in answer to question 1. 
participations? Please explain. 
¾  Is there a "subject-to-tax" or 
Dividends are not subject to tax in the Slovak Republic, 
"minimum effective taxation" 
whether they are paid to an individual, or to a legal entity. 
requirement? If yes, please 
As mentioned in answer to question 1, dividends must be 
explain. 
paid out of profit after tax to be classified as dividends 
that are exempt from taxation in the Slovak Republic, i.e. 
there has to be effective taxation of profits at the level of 
company that pays out the dividends. 
¾  Does the "subject-to-tax" or 
N/A 
"minimum effective taxation" 
Exemption of dividends from taxation is applied to 
requirement apply to the 
persons (individuals, or legal entities generally) that have 
subsidiary only or also to indirect 
participation in the company´s share capital. 
subsidiaries. Please explain. 
¾  Is a tax credit for underlying taxes  If profit distribution does not meet above mentioned 
available in case one of the above 
requirements (especially that dividends have to be paid out 
requirements is not met? Please 
of profits after tax), the tax exemption shall not be applied 
explain. 
as such payment is not considered to be dividend payment. 
Tax authority has the right to prequalify and tax such 
income based on the actual substance of the transaction in 
relation to which the income is paid. When applying 
method for elimination of double taxation (in case of 
particular payment), pertinent double tax treaty would be 
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Annex 2 
taken into account. 
 
1b. If no, please briefly explain your credit system. 
N/A 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
No. 
According to the Income Tax Act capital gain is ordinary taxable income.  
 
2a. If yes: 
 
¾  Is there a minimum participation 
N/A 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? 
N/A 
Is this different for domestic, EU, 
treaty or 3rd country participations? 
Please explain. 

¾  Is there a "subject-to-tax" or 
N/A 
"minimum effective taxation" 
requirement? If yes, please explain. 

¾  Is a tax credit for underlying taxes 
N/A 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Capital gain is ordinary taxable income of legal entity and is included in the tax base (taxed at 19 % 
tax rate). 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
No. 
According to the Income Tax Act loss from sale of company shares is not tax deductible (the loss 
arises when the acquisition costs exceed the sale price). 
 
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Annex 2 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No. 
Unrealised capital losses (from revaluation of long-held shares in company) are recorded on balance 
sheet accounts, i.e. they do not affect profit/loss or tax base.   
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
N/A 
(Please refer to answers to questions 3 and 4) 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
Goodwill may be amortized (included in tax base) only if the transferred assets are valued at real value 
for tax purposes. Goodwill is calculated as the difference between the purchase price/investment value 
and the real value of assets and liabilities. Such goodwill is amortized for tax purposes during 
maximum of consecutive seven years, in the amount at least of one seventh of the total goodwill. 
Goodwill shall not be amortized if transferred assets are valued at its original (tax) value, then it is not 
tax deductible expense. 
This legislative treatment is in accordance with the Council Directive 2009/133/EC on the common 
system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges 
of shares concerning companies of different Member States and to the transfer of the registered office 
of an SE or SCE between Member States. 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

No. 
Slovak legislation does not provide for CFC legislation. 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? 
N/A 
Please indicate. 
¾  A "low-or-no-tax" test? Please 
N/A 
indicate. 
¾  An activities based test? Please 
N/A 
indicate. 
Page 93 of 110 
 

Annex 2 
¾  An income based test? Please 
N/A 
indicate. 
¾  Any other test? Please indicate. 
N/A 
¾  Is there a layer limitation in the 
N/A 
CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying taxes 
N/A 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance 
N/A 
on the non-applicability of your 
CFC provisions? If yes, please 
explain via examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

General anti-abuse rule (“substance over form”) enables tax administrator to prequalify and tax the 
income based on the actual substance of the transaction in relation to which the income is paid (as 
mentioned in answer to question 1a. in the last row). 
 
 
--------------------------- 
 
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Annex 2 
24. SLOVENIA 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes. An exemption of inbound intercompany dividends if certain conditions are met is stipulated by 
Corporate Income Tax Act (CIT-2). 
 
1a. If yes: 
 
¾  Do you have a minimum 
No. 
participation requirement? Is this 
different for domestic, EU, treaty 
or 3rd country participations? 
Please explain. 

¾  Is there a minimum holding 
No. 
period? Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
Yes, there are “subject-to-tax” and "minimum effective 
"minimum effective taxation" 
taxation" requirement.  
requirement? If yes, please 
A payer must: 
explain. 
- be a taxpayer under CIT-2; or  
- (according to the tax law of a Member State) considered 
to be resident in Member State for tax purposes and, under 
the terms of a double taxation agreement concluded with a 
third State, is not considered to be resident for tax 
purposes outside Community and, in addition, must be 
subject to one of the taxes to which the common system of 
taxation, applicable in the case of parent companies and 
subsidiaries of different Members States applies, and 
without the possibility of an option or of being exempt; or  
- be a taxpayer - subject to income tax and/or profit tax, 
comparable to the tax under CIT-2. 
There is no exemption in a case a payer is a resident of the 
state, and in the case of a business unit this is located in a 
state where the general and/or average nominal rate of 
taxation applicable to profits generated by companies is 
lower than 12.5% and the state is listed on a published list 
in accordance with CIT-2. This does not apply to a payer 
who is a resident of another EU Member State. 
¾  Does the "subject-to-tax" or 
It applies to the subsidiary only. 
"minimum effective taxation" 
requirement apply to the 
subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes  A tax credit for underlying taxes is not available. 
available in case one of the above 
Page 95 of 110 
 

Annex 2 
requirements is not met? Please 
explain. 

 
1b. If no, please briefly explain your credit system. 
We have ordinary tax credit on country by country basis  – for elimination of juridical double taxation. 
It is available only for taxation of income of foreign permanent establishment and for withholding tax 
on different income which is included in taxpayer’s tax base. 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes. 50% of profit from disposal of equity holdings is exempt from the tax base of the taxpayer. 
 
2a. If yes: 
 
¾  Is there a minimum participation 
Yes, there is a minimum participation requirement. 
requirement. Is this different for 
According to CIT-2 50% of profit is exempt from the tax 
domestic, EU, treaty or 3rd country  base of the taxpayer, if the taxpayer who earns profit has 
participations? Please explain. 
participated in capital and/or managing of another person 
in such a manner that he/she is the holder of a holding, 
shares or voting rights amounting to at least 8%.  
It is not different for domestic, EU, treaty or 3rd country 
participations. 
¾  Is there a minimum holding 
Yes, there is a minimum holding period. According to 
period? Is this different for 
CIT-2 exemption of profits from disposal of equity 
domestic, EU, treaty or 3rd country  holdings is available if the time of participation (see 
participations? Please explain. 
above) in capital and/or managing companies, cooperative 
societies and other types of organisations last at least 6 
months. 
It is not different for domestic, EU, treaty or 3rd country 
participations. 
¾  Is there a "subject-to-tax" or 
Yes. The abovementioned exemption is not applicable in a 
"minimum effective taxation" 
case of profits from investments in ownership shares of 
requirement? If yes, please 
companies, cooperative societies or other types of 
explain. 
organisations that have a seat or place of actual operation 
of their management established in states where the 
general and/or average nominal rate of taxation applicable 
to the profits generated by companies is lower than 12.5% 
and the state is listed on a published list in accordance 
with CIT-2 and the these states are not EU Member States. 
¾  Is a tax credit for underlying taxes  No. In general, there is no tax credit for underlying taxes. 
available in case one of the above 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
Page 96 of 110 
 

Annex 2 
specific capital gains tax). 
Capital gains are taxed as ordinary profits. 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Yes, deduction is available for realised capital losses concerning the participation. 50% of losses 
arising from disposal of equity holdings under certain condition (see answer 2a.) are exempt from the 
tax base of the taxpayer.  
Loss arising from disposal of equity holdings is calculated as a surplus of purchase price or carrying 
amount after revaluation above the sum of the consideration received less cumulative loss plus 
cumulative gain that had been recognised directly in equity. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No. Deduction is available only for unrealised capital losses arising from revaluation of financial 
investments and/or financial instruments at fair value through profit or loss. 
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
No. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
In accordance with the accounting standards amortisation of goodwill is not allowed. For tax purposes 
- deduction is available for the expenses arising from a revaluation for impairment in goodwill in the 
accounted amount, however not exceeding an amount equalling 20% of the initial goodwill value. The 
surplus amount, which is not recognised as expense, shall be recognised in subsequent periods in such 
a way that this transferred amount plus the expense arising from revaluation for impairment in 
goodwill in the current tax period shall not exceed an amount equalling 20% of the initial goodwill 
value. 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign (sub) 
subsidiaries)?  

No, we do not apply CFC-type legislation. 
Page 97 of 110 
 

Annex 2 
 
7a. If yes, does the definition of a CFC 
 
contain: 
¾  A minimum shareholding test? Please  [reply] 
indicate. 
¾  A "low-or-no-tax" test? Please 
[reply] 
indicate. 
¾  An activities based test? Please 
[reply] 
indicate. 
¾  An income based test? Please indicate.  [reply] 
¾  Any other test? Please indicate. 
[reply] 
¾  Is there a layer limitation in the CFC-
[reply] 
definition (application to indirect 
subsidiaries).  

¾  Is a tax credit for underlying taxes 
[reply] 
available in case your CFC rules 
trigger immediate taxation of non-
distributed income? Please explain. 

¾  Do you provide advance clearance on  [reply] 
the non-applicability of your CFC 
provisions? If yes, please explain via 
examples. 

 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

We have described the anti avoidance rules for inbound dividends and realised capital gains in 1a and 
2a. We have general tax measures as transfer pricing rules, non deductibility of interest, WHT on 
interests and some services paid to jurisdiction with tax rate lower than 12.5%. 
 
 
---------------------------- 
 
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Annex 2 
25. SPAIN 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes, article 21 of Spanish Corporation Tax Law provides for an exemption to avoid double taxation of 
dividends and foreign-sourced income derived from the transfer of securities of companies non 
resident in Spain. 
 
1a. If yes: 
 
¾  Do you have a minimum 
Under Article 21.1.a, the minimum direct or indirect 
participation requirement. Is this 
participation in the capital or equity of the non resident 
different for domestic, EU, treaty 
company is determined in a 5%.  
or 3rd country participations? 
There is no exemption for domestic participations. 
Please explain. 
¾  Is there a minimum holding 
Under Art 21.1.a, the minimum holding period is 1 year. 
period? Is this different for 
 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
Under Art 21.1.b: the participated company must have 
"minimum effective taxation" 
been taxed under a foreign tax identical or substantially 
requirement? If yes, please 
similar to the Spanish Corporation Tax in the tax year in 
explain. 
which the profits distributed or participated are derived. 
This requirement shall be considered met if the 
participated company is a resident of a country with which 
Spain has signed a Convention to Avoid Double Taxation 
applicable to it, which includes an exchange of 
information clause.  
¾  Does the "subject-to-tax" or 
It is also applicable to indirect subsidiaries. They have 
"minimum effective taxation" 
also to fulfil the minimum participation and the minimum 
requirement apply to the 
holding period requirements. 
subsidiary only or also to indirect 
 
subsidiaries. Please explain. 
¾  Is a tax credit for underlying taxes  Under Art 32.1, when the tax base includes dividends or 
available in case one of the above 
participation in profits paid by a company non resident in 
requirements is not met? Please 
Spain, the tax effectively paid with respect to the profits 
explain. 
out of which the dividends are paid (underlying tax) shall 
be credited. The amount to be credited is that attributable 
to such profits, as long as it is included in the taxpayer’s 
tax base.   
To make this credit enforceable it is required: i) a direct or 
indirect participation in the capital of the non resident 
company of at least 5%; and ii) an uninterrupted holding 
during the year prior to the day in which the profit to be 
distributed becomes due; otherwise, the participation must 
be held for the time necessary to complete a year.  
 
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Annex 2 
1b. If no, please briefly explain your credit system. 
[reply] 
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Under Art 21.2 income derived from the transfer of participations in a company non resident in Spain 
is exempt when requirements in Art. 21.1 are met. 
 
2a. If yes: 
 
¾  Is there a minimum participation 
The minimum participation is 5% (EU or 3rd countries). 
requirement. Is this different for 
There is no exemption for domestic capital gains. 
domestic, EU, treaty or 3rd country 
 
participations? Please explain. 
¾  Is there a minimum holding period?  The minimum holding period is 1 year. 
Is this different for domestic, EU, 
 
treaty or 3rd country participations? 
Please explain. 

¾  Is there a "subject-to-tax" or 
The participated company has to be taxed under an 
"minimum effective taxation" 
identical or substantially similar tax to the Spanish 
requirement? If yes, please explain. 
Corporate Income Tax. 
¾  Is a tax credit for underlying taxes 
No
available in case one of the above 
 
requirements is not met? Please 
explain. 

 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

[reply] 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Art 21.2.c) In the case of the transfer of a participation in a company non resident in Spain, when the 
participation in the non resident company has been previously transferred by another entity of the 
same group of companies than the taxpayer and such transfer has derived a negative income integrated 
in the tax base of this tax. Any positive income derived from the subsequent transfer of the 
participation is taxed up to the amount of the negative income formerly derived by the other company 
of the group.  
Art 21.4 2º paragraph: Likewise, if a negative income is derived from the transfer of the participation 
in a non resident company formerly transferred by another company meeting requirements to be a part 
of the same group of companies as the taxpayer, such negative income is lessened in the amount of the 
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Annex 2 
positive income formerly derived in the transfer to which the exemption was applied.  
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
Art 21.4, 1st paragraph: If the exemption was applied to foreign-sourced dividends the amortization of 
the participation cannot be included in the tax base, irrespective of its nature and of the tax year in 
which it arises, up to the amount of such dividends.  
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
[reply] 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No 
 
 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Yes, it is foreseen in Article 107 of Corporate Income Tax Law 
 
7a. If yes, does the definition of a 
 
CFC contain: 
¾  A minimum shareholding test? 
Art 107.1.a. Taxpayers on their own or together with related 
Please indicate. 
persons or entities must have a participation equal to or 
exceeding 50% in the capital, equity, results or voting rights 
of the company non resident in Spain at the closing date of 
the business year of the non resident company. 
¾  A "low-or-no-tax" test? Please 
Art 107.1.b. The amount paid by the company non resident 
indicate. 
in Spain, attributable to any type of income qualified for 
inclusion in the taxable base due to the equal or similar 
nature of the tax paid, has to be less than 75% of the amount 
which would have been calculated in accordance with the 
Spanish Corporation Tax rules.   
¾  An activities based test? Please 
Art 107.2 Only positive income derived from the following 
indicate. 
sources shall be included in the taxable base: 
a.  Ownership of urban or rural properties or rights 
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Annex 2 
attributable to them, except when these properties 
are attached to a business activity or assigned for 
their use by non resident companies belonging to the 
same group of companies as the owner.  
b.  Participation in equity of any entity and assignment 
to third parties of equity, subject to some exceptions. 
c.  Credit, financial, insurance or services activities, 
except services directly related to export activities 
directly or indirectly performed with related persons 
or entities resident in Spain as long as these activities 
generate tax allowable expenses in these resident 
companies.  
Positive income shall not be included if more than 50% of 
the above mentioned revenues come from transactions 
performed with non related persons or entities.  
d.  Transfer of goods and rights referred to in 
paragraphs a and b generating income. 
¾  An income based test? Please 
Art 107.2.d: Income provided for in paragraphs a, b and d of 
indicate. 
paragraph 107.2 derived by the non resident company shall 
neither be included when stemming from companies in 
which it directly or indirectly participates in more than 5%, if 
the revenue of the companies deriving the income comes at 
least in an 85% from business activities. 
Art 107.3 Income referred to in paragraphs a, b and d of 
paragraph 107.2 shall not be included when their total 
amount is less than 15% of total income or 4% of total 
revenues of the non resident company. 
¾  Any other test? Please indicate. 
No 
¾  Is there a layer limitation in the  The CFC regime is also applicable to indirect subsidiaries. 
CFC-definition (application to 
 
indirect subsidiaries).  
¾  Is a tax credit for underlying 
Art. 107.9 The following amounts are allowable from net 
taxes available in case your 
payable tax: 
CFC rules trigger immediate 
a.  Taxes or levies effectively paid of the same or 
taxation of non-distributed 
similar nature as the Corporation Tax, in the amount 
income? Please explain. 
corresponding to any positive income included in the 
tax base. 
b.  The tax or levy effectively paid abroad on the 
distribution of dividends or the participation in 
profits, in the amount corresponding to any positive 
income previously included in the tax base.  
In the case of indirect participation in the non resident 
company through one or more non resident companies, the 
tax or levy effectively paid of the same or similar nature to 
the Corporation Tax shall be deducted by this or these 
companies, in the amount corresponding to the positive 
income previously included in the taxable base.   
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Annex 2 
The total amount of deductions referred to in paragraphs a 
and b cannot exceed the amount payable in Spain on the 
positive income included in the tax base.  
¾  Do you provide advance 
Art 107.15 The provisions of this Article shall not apply if 
clearance on the non-
the company non resident in Spain is a resident of another 
applicability of your CFC 
EU Member country, provided that the taxpayer proves that 
provisions? If yes, please 
its incorporation and operation has sound economic reasons 
explain via examples. 
and that it performs business activities.  
 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

[reply] 
 
 
_____________________ 
 
 
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Annex 2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
n
 
 
2
c

 
2
 

Annex 2 
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Annex 2 
Page 106 of 110 
 

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_____________________ 
 
 
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Annex 2 
27. UNITED KINGDOM 
 
1. Does your Member State provide for an exemption of inbound intercompany dividends if 
certain conditions are met? 

Yes. 
 
1a. If yes: 
 
¾  Do you have a minimum participation 
No. 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding period? Is 
No. 
this different for domestic, EU, treaty or 
3rd country participations? Please 
explain. 

¾  Is there a "subject-to-tax" or "minimum  No. 
effective taxation" requirement? If yes, 
please explain. 

¾  Does the "subject-to-tax" or "minimum 
Not applicable.  
effective taxation" requirement apply to 
the subsidiary only or also to indirect 
subsidiaries. Please explain. 

¾  Is a tax credit for underlying taxes 
Not applicable. 
available in case one of the above 
 
requirements is not met? Please explain. 
 
1b. If no, please briefly explain your credit system. 
Not applicable. The UK does provide for an exemption.  
 
 
2. Does your Member State provide for an exemption of capital gains on participations if certain 
conditions are met?
 
Yes – but only for disposals by a member of a trading group of substantial shareholdings in trading 
companies or in the holding company of a trading sub-group. 
 
2a. If yes: 
 
¾  Is there a minimum participation 
Yes – 10% holding of ordinary share capital in all cases. 
requirement. Is this different for 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a minimum holding 
Yes – 12 months, in all cases. 
period? Is this different for 
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Annex 2 
domestic, EU, treaty or 3rd country 
participations? Please explain. 

¾  Is there a "subject-to-tax" or 
No. 
"minimum effective taxation" 
requirement? If yes, please 
explain. 

¾  Is a tax credit for underlying taxes  Not for underlying tax. If a chargeable gain on the same 
available in case one of the above 
shares is taxed in another territory then relief may be due, 
requirements is not met? Please 
subject to the provisions of any Double Taxation 
explain. 
Agreement. 
 
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a 
specific capital gains tax). 

Where the substantial shareholding exemption does not apply then gains are subject to corporation tax 
on chargeable gains. 
 
 
3. Is a deduction available for realised capital losses concerning the participations? If yes please 
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales 
price or different).
 
Where the conditions for exemption under the substantial shareholding exemption are met then 
realised losses are not deductible. 
 
 
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly 
explain the conditions and methodology for calculating the loss (write down, amortisation, 
provision).
 
No – unless the holding has become of negligible value, in which case the holder may claim to treat 
the asset as if it had been disposed of. But not if subject to substantial shareholding exemption (SSE).  
 
 
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If 
yes please explain the methodology.
 
Yes - if there is a subsequent disposal of the asset. 
 
 
6. Is a deduction available for amortisation of any underlying goodwill of acquired 
participations? If yes please briefly explain the conditions and methodology for calculating the 
deductible amount (write down, amortisation, provision).
 
No. 
 
 
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Annex 2 
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign 
(sub)subsidiaries)?  

Yes. Please note the questionnaire has been answered by reference to new draft CFC rules contained in 
Finance Bill 2012. These rules will have effect for CFCs with accounting periods beginning on or after 
1 January 2013. 
 
7a. If yes, does the definition of a 
 
CFC contain: 
¾  A minimum shareholding test? 
The definition of whether an overseas company is a CFC is 
Please indicate. 
dependent on a range of factors, one of which includes 
shareholding. Once it is established that an overseas 
company is a CFC, a 25% shareholding is required before 
CFC profits are apportioned to any of the UK shareholders. 
¾  A "low-or-no-tax" test? Please 
Yes – rules only apply if tax suffered by CFC is less than 
indicate. 
75% of tax that would be suffered in UK. 
¾  An activities based test? Please 
Yes. Profits may be brought into the CFC regime because the 
indicate. 
activity that generates the profit is in the UK. 
¾  An income based test? Please 
Yes. The CFC charge is limited to certain defined categories 
indicate. 
of profit arising in the CFC. 
¾  Any other test? Please indicate. 
There are a number of entity based exemptions: excluded 
territories test; low profits test; low profit margin test; 
temporary period of exemption following acquisition or 
reorganisation. 
¾  Is there a layer limitation in the  Rules apply to direct and indirect subsidiaries. 
CFC-definition (application to 
indirect subsidiaries).  

¾  Is a tax credit for underlying 
In exceptional circumstances (for example a CFC charge in 
taxes available in case your 
respect of dividend income that would not be exempt if 
CFC rules trigger immediate 
received by a UK company), underlying tax credit would be 
taxation of non-distributed 
given. Generally, credit will be given for foreign taxes paid 
income? Please explain. 
in the CFC territory of residence, in effect leaving the UK 
with a secondary tax charge on the CFC profits. 
¾  Do you provide advance 
Yes – clearance is available on all aspects of the regime. For 
clearance on the non-
example, whether entity level exemptions apply, whether the 
applicability of your CFC 
UK activity conditions are met, or whether a full or partial 
provisions? If yes, please 
charge arises in respect of finance income. 
explain via examples. 
 
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to 
ensure that profits artificially diverted which may give rise to foreign source dividends are 
appropriately taxed? Please explain. 

Not applicable. The UK does apply CFC legislation.  
 
_____________________ 
 
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