What is the EIIS Scheme
The Employment and Investment Incentive Scheme (“EII Scheme”) is a tax relief incentive which provides tax relief for individuals against total income for income tax purposes. The EII Scheme offers one of the few remaining income tax reliefs and is one of the few sources of total income tax relief (which includes, for example, rental income, Approved Retirement Fund (ARF) distribution income). The Tax incentive provides for tax relief of up to 40% of the investment made in certain corporate trades. The EII allows an individual investor to obtain income tax relief on investments for shares in certain companies up to certain limits each tax year. Relief under EII is available to individual investors in unquoted micro, small and medium sized trading companies.
What is EIIS Tax Relief
Under the scheme, a taxpayer who puts money into an approved EII investment can reduce a substantial portion of their taxable income for the year in which the investment was made. The maximum investment allowed from 1st January 2020 is:
- €250,000, subject to those shares being held for a minimum period of 4 years or
- €500,000, subject to those shares being held for a minimum period of 7 years.
Tax relief on EIIS investments are not subject to the High Earners Restrictions. A married couple can each obtain individual relief on an investment of €250,000/€500,000, provided each spouse has sufficient taxable income. The rules of the EIIS scheme changed significantly in successive Finance Acts since 2015. The biggest changes were introduced with effect from 1 January 2019 when self-certification was introduced. This means that instead of Revenue processing EIIS applications and certificates, the investee companies will now self-certify applications and issue certificates directly to investors when certain milestones are achieved. This should significantly reduce the time investors have to wait to receive their tax relief.
Recently, The Minister for Finance announced further changes to the EIIS Scheme effective from 1st January 2022 such that investors are now eligible to receive their Statement of Qualification Certificates (SOQ) immeadiately upon investment rather than having to wait until the Company spends 30% of the investment funds received.
How do I Qualify for EIIS:
A qualifying investor is an individual who:
- Is resident in the State for the tax year in respect of which he/she makes the investment. However, in certain circumstances, a non-resident may qualify if they have income charged to Irish tax,
- Subscribes on his/her own behalf for eligible shares in a qualifying company.
- Is not, throughout the period of 2 years before and 4 years after making the investment, connected with the company or any of its subsidiaries. An investor cannot be “connected” with the company. Essentially what this means is that an investor should be a third-party investor with no prior connection with the company (other than where that connection is by means of a previous EII investment).
How do I Claim EIIS Tax Relief
The relief is given as a deduction from total income of an investor. It will reduce the individual’s income tax liability but will not reduce PRSI or USC. On receipt of a valid Statement of Qualification(SOQ), an investor can claim the relief by entering the amount in the relevant box on the Form 11 or Form 12 as appropriate. For investments made directly by an individual investor in a company relief should be claimed in the year in which the investment is made.
Further Information
For further information, you can also contact us at Medpoint for a copy of our 2022 Prospectus or on 01 901 0395 or e-mail eiis@medpoint.ie
