A Participating Interest refers to an ownership stake of 5% or more in the shares or capital of a foreign juridical person. For a foreign juridical person to qualify as a Participation, the following conditions must be met:
- The Taxable Person must hold an ownership interest of 5% or more. As an alternative to the requirement to have a 5% or more ownership interest, a Taxable Person will be treated as having a Participating Interest in a Participation where the aggregate acquisition cost of ownership in that juridical person is AED 4 million or more.
- The participation must be held or intended to be held for at least 12 months.
- The Taxable Person must be entitled to at least 5% of profits available for distribution by the Participation and at least 5% of the liquidation proceeds of the Participation.
- Less than 50% of the participation’s direct and indirect assets consist of ownership interests that would not qualify for the exemption if they were held directly by the Taxable Person.
- The foreign juridical person must be tax-resident in a country that levies a headline statutory tax rate of at least 9%, or at an effective tax rate of at least 9% on profits.