The Employment and Investment Incentive Scheme (EIIS) offers a 40% tax break to Irish tax-payers which encourages the provision of equity-based finance to qualifying Irish SMEs.
The tax relief is split into two tranches with 30% of the investment amount available as a reduction to taxable income (operating similarly to a pension contribution) in the year of investment and an additional 10% in the fourth year, following investment, conditional on employment in the Company having increased over this term.
The appeal of EIIS as a funding source to Companies is widely documented; providing a fixed cost of finance; bridging the gap between traditional bank finance and venture capital and having a 4-year term which means no capital repayments are required until maturity.
However, there are many less well-known features to the administration of the scheme:
1. EIIS allows for Multi-Annual Investments
Many people think that EIIS is a one-time deal; this is not the case.
Although a limit of €5,000,000 applies to any 12-month period, companies can raise up to €15,000,000 in their lifetime. This means large projects with multiple phases can be catered for over several years.
Take our investment in McArdle Skeath. They required funding to develop a 21-acre site located in Hollystown, to house their expanding logistics, transport and supply chain management business.
The scale of the project and the timing of the required cash outflows, combined with the evolution and continued success of the business required successive investments from several of the Goodbody EIIS Funds.
2. It’s not just for new Companies
Another common misconception is that EIIS can only be raised within the first 7 years of trading.
However, if a company has raised some EIIS in the first 7 years of trading, they can continue to raise EIIS once it had been foreseen in the original business plan submitted to Revenue.
This is significant; when submitting a business plan to Revenue all future EIIS Fundraises must be foreseen and included.
But what about a company that is older than 7 years and has not previously raised EIIS? Funding can be sought for a new product, new service or to enter a new geographical market; once the amount of EIIS investments exceeds 50% of the Companies average annual turnover in the preceding 5 years.
Our investment in the long established Spectac Group – who have been producing stainless steel tanks for over 40 years – enabled them to move into a new service offering, financing the construction of a 45 HL fully automated brewery which now acts as a contract brewing facility and home of their own ‘Brewmaster’ brand.
3. You don’t need to be an Irish Company to raise EIIS
While it’s often assumed that only Irish companies can qualify for EIIS, Companies resident in another EEA State can qualify as long as they carry on business in Ireland through an Irish branch or subsidiary.
Clearly there are many technical aspects involved when applying for EIIS relief.
The main benefits of seeking funding from the Goodbody EIIS Funds is our knowledge of the scheme, experience in the sector and our understanding of the qualification criteria; not to mention our ability to move quickly, with funds readily available for investment.
If your company is seeking investment and you wish to discuss EIIS, don’t hesitate to get in contact today – email email@example.com.
You can learn more about Kate Henebry, Senior Analyst in Corporate Finance, by visiting her LinkedIn profile here.