The German Government has received approval under the EU State Aid rules for modifications to its MoRaKG legislation, which is similar in substance though not in detail to Irish BES or UK EIS reliefs. Competition Commissioner Kroes said that “I am pleased that Germany intends to give tax breaks to stimulate private investors to offer more risk capital.”

However, the German authorities will be obliged to modify some of their proposed rules which would have obliged certain MoRaKG vehicles to have their domicile and corporate management in Germany. The Commission pointed out that “This would infringe the right of companies to establish themselves anywhere they chose within the Single Market (freedom of establishment – Article 43 of the EC Treaty)”.

What doesn't appear to have been at issue was the benefits to individual private investors. The maximum tax benefit available of €22,500 is “relatively small” in the venture capital market and therefore would not unduly distort competition.

Full details of the EU decision are not generally available, but the Commissioner's statement can be found at http://europa.eu/index_en.htm