Cutting taxes while investing in Irish Industry

Sinéad Heaney outlines the benefits of the Employment and Investment Incentive Scheme (EIIS) to companies and individual investors.

Whether you are an SME on the rise or an individual looking to invest in some of Ireland’s most exciting new companies, while also reducing your income tax bill, the Employment and Investment Incentive Scheme (EIIS) is an option to consider. Introduced in 2011, the EIIS replaced the Business Expansion Scheme (BES) that had been running since 1984. For Irish SMEs, the EIIS can play a key role in providing early-stage funding, or to help them expand into markets beyond our shores. For investors, the scheme can offer up to 40% tax relief on investments of up to €250k per year in qualifying companies for a minimum four-year holding period. For those willing to invest for longer, you can invest up to €500k per year in qualifying companies for a minimum seven- year holding period, subject to certain conditions.

What further enhances its appeal to investors is that it is one of the few sources of total income tax relief (which includes, for example, rental income and ARF distribution income) still available to Irish taxpayers. While capital placed in the EIIS is subject to investment risk, there is also the potential for additional capital return on exit, subject to investment agreement. There is also the added bonus that your investment helps indigenous Irish companies to grow and flourish. The scheme can appear complex, but in recent years 

Revenue has improved its accessibility for both investors and investees. Self-certification was introduced in 2019, and the requirement for companies to spend 30% of the investment beforeinvestors could obtain tax relief was removed in 2021. While the scheme can be accessed directly by private placement (direct contact between the investor and investee), there are benefits for both parties to approaching the EIIS through an EIIS fund, for example the Davy EIIS Funds. The Davy EIIS Funds are managed by BES Management DAC, a joint venture company (owned by BDO and Davy) and is the longest running EIIS fund manager in Ireland. With the expert assistance of an experienced fund manager, both investors and investees can navigate the complexities of the scheme and maximise benefits in the process. BES Management has facilitated the investment of over €200 million in EIIS funding in ambitious, growing companies throughout Ireland.

For investors, an EIIS Fund can provide individuals with diversification across a range of companies and sectors, utilising the expertise of an experiencedteam of professionals to make the important decisions about where to place your money. For SMEs seeking investment, they can raise up to €15m in equity capital under the scheme, with a limit of €5m in any 12-month period. While various conditions must be met by SMEs to qualify for EIIS, the main criteria that must be fulfilled is that the company is under seven years of age, or if not, that they are intending to use the investment to develop a new product offering or expand into a new market.

While the scheme is one that requires careful navigation, there is certainly plenty to attract both SMEs and those looking to make tax-friendly investments in Irish companies. For both SMEs and investors, further details and information on the EIIS is available on Revenue.ie or contact us at www.bes.ie

DCU graduate Sinéad Heaney (BA in Accounting & Finance, 1998), is a Partner (Corporate Investment and Business Advisory) at BDO