4.2.8.1. Conditions for exemption from participations in entities

For the exemption to be applicable, the following conditions must be met on the date of accrual of the Tax (December 31):

1. ENTITY THAT CARRIES OUT AN ECONOMIC ACTIVITY

   The entity, whether corporate or not, must effectively carry out an economic activity and must not have as its main activity the management of movable or real estate assets.

   It will be understood that an entity manages movable or real estate assets and, therefore, does not carry out an economic activity when any of the following conditions exist for more than 90 days of the fiscal year: 

   That more than half of its assets are made up of securities or that more than half of its assets are not assigned to economic activities. 

   To determine if there is economic activity or if a property element is affected by it, the provisions of the Personal Income Tax will be followed. 

   Both the value of the asset and that of the assets not used in economic activities will be deduced from the accounting, provided that it faithfully reflects the true asset situation of the company.

   For the purposes of determining the part of the asset that is constituted by unaffected values or assets:

   1. The following values will not be computed:

      • Those held to comply with legal and regulatory obligations.
      • Those that incorporate credit rights arising from contractual relationships established as a consequence of the development of economic activities.
      • Those owned by securities companies as a consequence of the exercise of the activity constituting their object.
      • Those that grant at least five percent of the voting rights and are held for the purpose of directing and managing the participation provided that, for these purposes, the corresponding organization of material and personal means is available, and the entity participated is not included in this section.
   2. Those whose acquisition price does not exceed the amount of the undistributed profits obtained by the entity will not be computed as securities or as elements not affected by economic activities, provided that said profits come from the performance of economic activities, with the limit of the amount of the benefits obtained both in the year itself and in the last 10 previous years. For these purposes, the dividends that come from the securities referred to in the last paragraph of the previous paragraph are assimilated to the profits from economic activities, when the income obtained by the investee entity comes, at least 90 percent, from carrying out economic activities. 
2. MINIMUM PARTICIPATION IN THE ENTITY

   The taxpayer's participation in the capital of the entity must be at least 5 percent, computed individually, or 20 percent jointly with his or her spouse, ascendants, descendants, or second-degree collateral, whether its origin is the kinship by consanguinity, affinity or adoption.

3. EXERCISE OF DIRECTIONAL FUNCTIONS

   The taxpayer must effectively exercise management functions within the entity.

4. REMUNERATION GREATER THAN 50 PER 100

   For the management functions carried out in the entity, the taxable person must receive remuneration that represents more than 50% of his total income from work and economic activities.

   For these purposes, the income from economic activities whose assets and rights benefit from exemption from this tax will not be computed.

   When the participation in the entity is joint with the spouse, ascendants, descendants, or second-degree collateral, whether the relationship has its origin in consanguinity, affinity or adoption, the management functions and the remunerations derived from the The same must be met by at least one of the people in the kinship group, without prejudice to the fact that all of them have the right to the exemption.