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Revenue eBrief No. 107/15 Changes to the Employment and Investment Incentive (EII) from 13 October 2015

On 13 October 2015, the Minister for Finance announced a number of changes to the Employment and Investment Incentive (EII) scheme. From that day, any company which issues shares is doing so under the EII scheme as amended on that date. Therefore, any company which had received EII outline approval from Revenue prior to 13 October 2015 but had not raised EII funding by that date must now consider, before issuing shares, whether or not it is a qualifying company under the amended scheme.

Investors should note that outline approval issued prior to 13 October 2015 may no longer be valid. They should confirm with the potential investee company that it complies with the new requirements of the scheme.

A brief summary of the changes is available on the Revenue website.

The main change which is likely to exclude companies which may have been qualifying companies prior to 13 October 2015 is the new requirement that a qualifying company must now meet the conditions of paragraphs 5 and 6 of Article 21 of Commission Regulation (EU) 651/2014 of 17 June 2014. These paragraphs are reproduced below for ease of reference:

  1. 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:
    1. they have not been operating in any market;
    2. they have been operating in any market for less than 7 years following their first commercial sale;
    3. they require an initial risk finance investment which, based on a business plan prepared in view of entering a new product or geographical market, is higher than 50% of their average annual turnover in the preceding 5 years.
  2. The risk finance aid may also cover follow-on investments made in eligible undertakings, including after the 7 year period mentioned in paragraph 5(b), if the following cumulative conditions are fulfilled:
    1. the total amount of risk finance mentioned in paragraph 9 is not exceeded;
    2. the possibility of follow-on investments was foreseen in the original business plan;
    3. the undertaking receiving follow-on investments has not become linked, within the meaning of Article 3(3) of Annex I with another undertaking other than the financial intermediary or the independent private investor providing risk finance under the measure, unless the new entity fulfils the conditions of the SME definition.

Revenue is preparing a set of FAQs on the revised scheme which will issue by the end of the month (November). In addition, and an updated Form EII Outline will be available shortly. In advance of issuing shares, companies can reapply for outline approval. If a company does reapply, it must include a cover letter setting out an assessment of how it meets the conditions of the amended scheme.

Source: Revenue Commissioners. www.revenue.ie. Copyright Acknowledged.