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EU Commission Approves Seed Capital Scheme For Irish Start-Ups

by Jason Gorringe, Tax-News.com, London

05 November 2004

Ireland’s Minister for Finance, Brian Cowen, has announced that state aid approval has been recently received from the European Commission for two schemes aimed at helping new firms gain access to start-up capital.

Welcoming the EU’s approval of the Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS), Cowen commented: “There is a strong business case for these schemes. Businesses, particularly small and start-up companies, often experience difficulty in accessing early stage development capital.”

He added: “It is clear 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”.

However, the European Commission directed that Ireland make a small number of amendments to the legislation governing the schemes, and these changes will mean:

  • qualifying companies must be Small and Medium Sized Enterprises (SMEs) within the European Commission definition in force for the relevant period;
  • tax relief under the BES/SCS will be available for individual investments in companies registered in the European Economic Area but with an establishment in Ireland carrying out qualifying activities;
  • while a company may raise equity capital up to a general maximum of €1 million in the lifetime of the company, the schemes will respect the aid ceilings as set out in the European Commission's Guidelines on State Aid and Risk Capital so that a company may not raise more than €750,000 in any six month period from 5 February;
  • the following sectors will be formally excluded from the scheme: shipbuilding, European Coal and Steel Community sectors and non viable companies within the European Community Guidelines on State Aid for rescuing and restructuring firms in difficulty.
Upon signing the new legislation, the schemes will become effective from 5 February 2004 and will operate until 31 December 2006 in line with the Commission approval.

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