EIIS Investments Opportunities
What are EIIS Investments?
EIIS (Employment Investment Incentive Scheme) is a mechanism for
start-ups and young businesses in Ireland to receive investment that is
tax efficient for the investor. Essentially the investor can receive
40% tax relief* on the investment so €1000 invested costs just €600.
One attractive aspect is that unlike pension contributions tax relief is also available on non-earned income such as dividends and rental income.
There are some rules and requirements:
- A absolute minimum period of four years.
Maximum investments in a year of €500,000 in respect of the years after 2019, subject to those shares being held for a minimum period of seven years; or Maximum investments in a year of €250,000 in respect of the years after 2019 where those shares are held for a minimum period of four years only.
- As of Budget 2024 the maximum investment in a year of €500,000 for all periods.
- Not subject to the High Earners Restrictions
- You are investing in young companies so there is a significant risk losing all the investment. Spreading the risk across multiple EIIS investments should be considered.
- You may not get an exit at four years
- Capital Gains Tax (CGT) will need to be paid on any gains
may be a fixed rate of return and exit timeline akin to a loan or they
may be equity giving a full participation in the upside and potentially
higher returns but less predictable exit times.
You can invest in EIIS scheme a number of ways:
Directly invest with the company. This typically requires a minimum investment of €5,000-€10,000.
in an EIIS fund. This typically requires a minimum investment of
€10,000-€20,000 and a ~3% initial fee. The advantage is you area
automatically getting diversification into 5-10 companies and a level of
professional expertise which will hopefully improve the gains. Some
funds do cap the upside gains however but this may be due to a fixed rate of return. In addition, you will need to wait
for them to invest your money for you adding perhaps 6-9 months to the
- Invest via a Crowdfunding Platform. Some of the Crowdfunding Platforms offer EIIS investment opportunities. The minimum investment is around €250 allowing you to diversify. A certain amount of due diligence has been done before these companies get on to these platforms.
This site aims to be a single point of reference for current EIIS investment opportunities in the Irish market.
An individual on the higher tax rate would normally pay 40% marginal rate of income tax. There for €1000 gross earned would result in €600 net.
If the individual invested €1000 in EIIS investment(s):
€1000 invested in a successful company. 40% tax relief* can be claimed. At the end of 4 years an exit returns a total of €1300 giving a Capital Gain of €300. Assuming Capital Gains Tax of 33% brings this down to €200. This leaves a net value of €1200. This is double what you would have had if you not invested.
€1000 invested in a unsuccessful company. 40% tax relief* can be claimed. The company fails returns a total of €0. This leaves an actual net loss of 60%.
As to how many of your investments would be successful ?
Obviously this hard predict but early stage investors might expect 50% fail, 40% could be marginally successful and 10% could be very successful.
See the Official Revenue Information on EIIS
Please note that there has recently been some affecting EIIS changes in Finance Bill 2024. These will mean a replacing of the 40% tax relief with a range on rates between 20% and 50%. The basic rules are as follows:
- 50% tax relief for businesses that have "not operated in any market" so likely very early stage businesses.
- 35% tax relief for businesses less than 7 years old fundraising via EIIS for the first time.
- 20% tax relief for businesses EIIS fundraising its second or subsequent times.
- 20% tax relief for business expanding into new markets or regions.
- 30% tax relief for investments via a "Qualifying Investment Fund" which would currently include only the Elkstone Fund.
Likely many of the investments currently getting a 40% tax relief will move into the 35% bracket.