EU Approves Extension Of Irish Investment Incentives

by Jason Gorringe, Tax-News.com, London

04 September 2007

Irish Minister for Finance, Brian Cowen has announced that State aid approval has now been received from the European Commission for the extension and amendment of Ireland's Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS).

Welcoming the EU approval, Cowen said last week that “all of the studies carried out on these schemes, including the review carried out by my Department prior to the Budget last year, have shown that there is a strong business case for continuation of these schemes".

Cowen added:

"It is clear that businesses, particularly small and start-up companies, often experience difficulty in accessing early stage development capital. I am delighted to have secured the necessary approval from the European Commission under State aid rules. It is generally recognised that there is a shortage of such finance in the pre and early start up phases of new enterprises. The BES and the SCS will continue to play an important role in helping bridge this financial gap for such businesses. The importance of these schemes is further reflected in our continued commitment to them in the agreed Programme for Government."

"The extension of these schemes will encourage further enterprise, incentivise innovation and promote competitiveness in Irish industry. They will help position our businesses for long-term success."

The Finance Bill 2007 extended the BES and SCS, which provide tax relief for companies and investors in small and start-up business in Ireland, for seven years until December 31, 2013. In addition, the bill increased the company limit from EUR1 million to EUR2 million, subject to a maximum of EUR1.5 million to be raised in a twelve-month period. The investor limit was also increased from EUR31,750 to EUR150,000 in the case of the BES, and to EUR100,000 in the case of the SCS.

However, the EU's approval of the measures is subject to a number of conditions, and a small number of amendments to the legislative provisions governing the schemes will be necessary. The Minister intends to bring forward the necessary amending provisions shortly.

Under these changes, which apply from January 1, 2007:

• Medium-sized enterprises may qualify if they are located in assisted areas (currently includes all counties except Dublin, Meath, Kildare and Wicklow, as defined under EU State aid guidelines). In non-assisted areas (currently Dublin, Meath, Kildare and Wicklow) they may qualify where they are in seed or start-up phase only.
• In order to comply with EU rules on the cumulation of State aids, a company that raises finance under the BES and/or the SCS will have the level of other State aids affected (with the exception of grants for research and development).

“These EU conditions should not significantly hinder the overall contribution of the BES scheme to economic development and employment," Cowen concluded.

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