How does Tax Relief Work on the Employment and Investment Incentive Scheme?

The Employment and Investment Incentive Scheme (“EII Scheme”) is a tax relief incentive scheme which provides tax relief against total income for income tax purposes to Qualifying Investors for investments in certain Qualifying Companies. 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, ARF distribution income).

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, where those shares are held for a minimum period of 7 years.

Tax relief on EIIS investments is not subject to the High Earners Restrictions. A married couple can each obtain individual relief on 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.