EII is a tax relief which encourages individuals to provide equity based finance to trading companies by allowing individuals to obtain Income Tax relief on investments for shares in certain qualifying companies. Since October 2019 the tax relief of up to 40% of the investment made is available in full in the year of investment.
An individual who has made a qualifying investment on or after 1 January 2020 can claim relief on investments up to a maximum of €250,000 per year of assessment. Please note that shares must be retained for at least 4 years. Alternatively, an individual who has made a qualifying investment on or after 1 January 2020 can claim relief on investments up to a maximum of €500,000 per year of assessment subject to the following:
• An investor must ‘elect’ to retain those shares for a period of 7 years in order to claim the maximum relief. The election must be made at the time of the share issue.
• An investor cannot then ‘opt out’ of the election at a later date before the 7 years expired without suffering a clawback of the total relief initially claimed.
Where an investor invests an amount greater than the maximum amount allowed in a year, the excess over the maximum amount can be carried forward against future Income Tax liabilities. A Statement of Qualification (SOQ) must be issued by the qualifying company within 4 months after the end of the year in which shares are issued.
Finance Act 2021 extended this relief by a further 3 years to 31 December 2024.