Taxation of dividends The current imputation system, which has applied since 1990, is replaced by a classical double taxation system, under which corporate income is first taxed in the hands of the company and dividends subsequently (with partial relief) in the hands of the shareholders at the appropriate rates. As a corollary to this, the equalization tax (29/71) on distributions is abolished.

(a) Corporate shareholders. Under the new system, the cascading effect of the taxation on intercompany dividends is eliminated by a participation exemption. Generally, dividends from resident and non-resident companies are exempt from tax in the hands of resident corporate shareholders. Intercompany dividends are nevertheless taxable if:

1. the distributor is a non-resident company other than a company listed in Art.2 of the EC Parent-Subsidiary Directive;
2. the recipient is a financial ins…