The effects of the new regime of "participation exemption"

Abstract

The CIT reform, that intended to attract foreign investors to Portugal, making it a capital exporter country, had as its main banner the creation of a participation exemption regime, on the grounds that there was a lack of competitiveness in the area of dividend and capital gains taxation.

This paper focuses on analyzing the changes introduced by the CIT reform in Portugal under this participation exemption regime, thru a comparative study between the previous and the new regime.

Initially, we show the system in force up to the end of 2013. Afterwards a chapter where we describe the new regime brought by the CIT reform. And we end with a comparative example between the regime pre-reform and the regime post-reform.

We finish concluding that the new participation exemption regime is, in fact, more advantageous and appealing than the previous one, not only for bringing less complexity to the tax system (by extending to all entities the specific arrangements applicable to the holding companies), but also for reducing both the tax base and the CIT rate.