Plans to reform the EIIS (Employment and Investment Incentive Scheme) with a view to boosting investment in innovative indigenous SMEs, have been warmly welcomed.
Other moves announced, including the commitment of a further €30 million to the innovative equity fund, and an extension of the Section 486C corporation tax relief for certain start-up companies to the end of 2026, have also been well received.
Responding to the range of announcements made in Budget 2022, the Irish Venture Capital Association (IVCA) said that with pending changes in the taxation of multinationals based here, now is the right time to review measures to create the right environment for Irish companies to scale.
Minister for Finance Paschal Donohoe in his budget speech outlined plans to extend the EIIS for a further three years and to bring forward a number of improvements, the effects of which he said would make it more attractive to investors.
EIIS is a State-backed initiative first introduced in 2011 that allows small investors to claim relief on investments in early-stage companies. Although it is used by some small businesses to raise capital, there has long been a call from the start-up community for it to be enhanced for several years to make it more attractive to investors.
The new EIIS changes announced include a broadening in the range of investment vehicles which qualify for tax relief, and the removal of the rule that 30 per cent of an investment in an EIIS company must be spent before relief can be claimed.
"We welcome the positive measures in the budget specifically targeting private investment in early-stage start-ups, as it is vital that the Government gives greater support to the indigenous tech sector," said Martina Fitzgerald, chief executive of Scale Ireland.
R&D tax credit
“In terms of the upcoming Finance Bill, we hope the Government will be able to implement many of the changes in the 2019 Finance Bill – for small and micro companies – which are still outstanding. These include increasing the R&D tax credit from 25 per cent to 30 per cent, which would have a significant impact,” she added.
The IVCA, the representative body for the leading venture capital and private equity firms locally, welcomed the extended commitment and the moves to reform EIIS.
“The association looks forward to further positive engagement with the Government with a view to unlocking far greater asset allocation from institutional investors into Ireland’s indigenous, high-growth SMEs,” said IVCA chairwoman Nicola McClafferty.
“Now is the time to build an equity culture in Ireland, allowing early-stage investment in private businesses to become an attractive asset class for not only institutions but individuals as well,” she added.
Ibec-affiliated Technology Ireland, also welcomed changes to EIIS, but director Una Fitzpatrick expressed disappointment that no signal of intent was given to serial entrepreneurs via improvements to capital gains tax (CGT) relief.
Ms Fitzpatrick also welcomed among other things, the introduction of a new digital transition fund, which will help encourage the development and adoption of data analytics and AI; a new tax credit for the digital gaming sector of 32 per cent on expenditure on projects up to €25 million, and the extension from four to seven years of tax relief on shares bought in smaller companies, which she said will help support investment in start-ups and SMEs.