The Employment Investment & Incentive (EII) allows individual investors to obtain income tax relief on investments made, in each tax year, into EII certified qualifying companies. The EII replaced the Business Expansion Scheme (BES) and runs until 2020.
Companies seeking EII relief must directly seek certification from the Revenue Commissioners. EII relief is given under Article 21 of GBER and now requires EII funding to meet the following requirements:
Eligible undertakings shall be undertakings which at the time of the initial risk finance investment are unlisted SMEs and fulfil at least one of the following conditions:
- they have not been operating in any market
- they have been operating in any market for less than 7 years following their first commercial sale
- The cumulative limit on EII investment is now €15m as defined under the GBER and the rules may apply to other State Aid received where total State Aid received exceeds €15m.
The EII is open to the majority of SMEs However, the following trading activities will not be eligible for the scheme:
- Adventures or concerns in the nature of trade
- Dealing in commodities or futures in shares, securities or other financial assets
- Financing activities
- Professional service companies
- Dealing in or developing land
- Operating or managing hotels, guest houses, self-catering accommodation or comparable establishments or managing property used as a hotel, guest house, self-catering accommodation or comparable establishment
- Operating or managing nursing homes or residential care homes or managing property used as a nursing home or residential care home
- Operations carried on in the coal industry or in the steel and shipbuilding sectors
- The production of a film (within the meaning of section 481)
All EII investments are capital at risk products running for 4 years. Up to €150,000 can be invested in any tax year. The investment is relieved of income tax from all sources of income.
30% of the tax break comes in year 1 and 10% in year 4. Apart from the tax relief, investors should expect to get a return of 15% to 20% on their invested capital.