In the context of the corporate tax reform, an additional condition has been added in order to benefit from an exempt capital gain on shares.
For financial years starting from 1/1/2018, a minimum participation of 10% or 2.5 million euros acquisition value is required (participation condition). In addition, the participation must be held for at least one year (permanence condition) and the company whose shares are held may not benefit from a different valuation regime.
It is important to note that the participation and permanence conditions do not apply to capital gains on shares held by investment companies.
The law defines an investment company as "a company the object of which is the joint investment of capital".
For this purpose, the Service for Advance Decisions in Tax Matters uses 2 important criteria for the qualification as an investment company:
- There must be a multitude of investors;
- There must be a multitude of investments to spread the risk.
It is therefore important to check whether the company complies with the tax definition of investment company.
It is advisable to ask for written confirmation (ruling) as to whether this tax definition has been met. In this way, the subsequent capital gain on the investment will still be exempt from tax. Dividends received can also benefit from the dividend received deduction.