Participation exemption in Luxembourg, article 166 LIR, conditions and thresholds.
The participation exemption exempts, under conditions, the dividends and capital gains a Luxembourg company derives from qualifying participations. We check your eligibility and secure the application of article 166 LIR.
The participation exemption (Luxembourg parent-subsidiary regime, art. 166 LIR) exempts dividends and disposal capital gains from qualifying participations held by a fully taxable Luxembourg company, subject to threshold, holding-period and subsidiary-quality conditions.
Article 166 LIR and the amended Grand-Ducal regulation of 21 December 2001; parent-subsidiary directive 2011/96/EU (including the anti-abuse clause). The withholding tax exemption on outbound dividends derives from article 147 LIR.
Key takeaway
- Dividends: at least 10% participation or an acquisition price of at least €1.2m, held 12 months.
- Capital gains: at least 10% participation or an acquisition price of at least €6m, held 12 months.
- The exemption presupposes a qualifying subsidiary and genuine substance.
Participation-exemption conditions (art. 166 LIR)
| Condition | Dividends | Capital gains |
|---|---|---|
| Participation threshold | 10% of capital | 10% of capital |
| Acquisition-price alternative | ≥ €1.2m | ≥ €6m |
| Holding period | 12 months (or commitment) | 12 months (or commitment) |
| Subsidiary quality | Qualifying company | Qualifying company |
Who this is for
- SOPARFIs and holdings receiving dividends from subsidiaries
- Groups realising capital gains on participation disposals
- Investors structuring the ownership of European subsidiaries
- Family offices consolidating a corporate estate
What we do
- Eligibility analysis (threshold, duration, subsidiary quality)
- Monitoring of the 12-month holding period
- Treatment of expenses linked to the participation (recapture)
- Documentation and application in the tax return
- Articulation with withholding tax and treaties
Ready to structure your participation exemption?
Free first call within 24 hours. Dedicated adviser, NDA from first contact.
Preparation checklist
Get the list of documents and steps to start without friction.
Frequently asked questions
What is the participation exemption?
What are the thresholds for dividends?
What thresholds apply to disposal capital gains?
Are expenses linked to the participation deductible?
Does substance affect the exemption?
Request a quote
Reply within 24 business hours. NDA from first contact.