A very concise comparative study of the foreign distribution exemption regimes of four major EU countries can be made: UK, Germany, Netherlands and France.
Although the UK has five separate classes of exemption in its regime, it is anticipated that only distributions from controlled companies and in respect of non-redeemable ordinary shares will account for the vast majority of foreign distributions. This will simplify the UK regime considerably.
Out of the four countries only the UK and Germany do not impose any minimum shareholding requirement. Germany has a much stricter CFC regime than the UK and the Netherlands has a much less well-developed set of CFC rules.
The French, Dutch and German systems all permit, to some extent, dividends that are tax deductible in another territory to qualify for the participation exemption. Also these three countries broadly apply the same criteria to the exemption of capital gains from the disposal of shares as to the exemption of dividend distributions. The UK has separate rules for the exemption of capital gains from the disposal of shares in qualifying subsidiaries. For details of this “Substantial Shareholdings Exemption” please read the articles under the link “Corporate Clients”.
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