The participation exemption allows dividends and capital gains to ‘participating interests’ to be given tax-free and value decreases are not deductible. The exemption works both ways.
A ‘participation’ is basically when a parent company holds at least 5% of the share capital of a subsidiary.
The bill regulates the ‘partitioning’ of the participation exemption. If a certain shareholding does not qualify as a ‘participation’ over a certain period of time, then the exemption does not apply. When the holding later becomes a ‘participation’, then the exemption does apply in principle, but not for dividends and capital gains which are attributable to the period that there was no ‘participation’.