At The Leinster Partnership we believe that access to funding is one of the biggest challenges facing ambitious Irish SMEs. Bank lending is not always the right fit for a growing business, and giving away equity can feel daunting. The Employment and Investment Incentive Scheme, commonly known as EIIS, offers a valuable middle ground. By allowing investors to claim income tax relief on qualifying investments, it can make your business a far more attractive proposition to private investors and help you raise the capital you need to grow.
What Is EIIS?
EIIS is a tax relief scheme designed to encourage individuals to invest in Irish SMEs. When an individual invests in qualifying shares in an eligible company, they can claim income tax relief on the amount invested. The relief is available at different rates, up to 50% in some cases, depending on the stage of the company’s development and the type of investment.
For the company, this means investors effectively take on less risk for every euro they commit. That can make the difference between an investor saying no and saying yes, and can help businesses raise larger amounts than they might otherwise achieve.
Why EIIS Appeals to Investors
Investing in a private company carries risk, and investors know their money may be tied up for several years. Tax relief reduces the net cost of the investment, improving the potential return and cushioning the downside if things do not go to plan. For high-earning individuals paying tax at the higher rate, the relief can be particularly attractive.
When approaching potential investors, being able to confirm that your company qualifies for EIIS can strengthen your pitch considerably, alongside a strong business plan and a credible growth story.
Which Companies Can Qualify?
EIIS is aimed at small and medium-sized companies that are unquoted and carrying on a qualifying trade in Ireland. Most trading activities can qualify, including manufacturing, technology, tourism, services and many other sectors. However, certain activities are excluded, such as financial activities, dealing in or developing land and some professional services.
The company must meet the EU definition of an SME, and there are limits on the total amount a company can raise through the scheme over its lifetime. Additional conditions apply depending on the age of the company and its stage of development, so it is important to confirm eligibility before approaching investors.
How the Money Must Be Used
Funds raised through EIIS must be used for genuine business development, such as expanding operations, hiring staff, investing in equipment, developing new products or entering new markets. The money must generally be used within a set period, and it cannot simply be used to pay off existing debts or buy out other shareholders.
Being clear about how the investment will be spent is essential, both for compliance and for building investor confidence. A detailed plan showing how the funds will drive growth will help on both fronts.
Conditions for Investors
Investors must hold their shares for a minimum period, generally at least four years, to retain the relief. There are annual limits on the amount of relief an individual can claim, although unused relief can often be carried forward.
The relief is designed for independent investors. Restrictions apply where an investor, together with their associates, holds a significant stake in the company, and individuals already connected with the business may face limitations. Follow-on investments by existing EIIS investors can qualify in certain circumstances.
Your Responsibilities as a Company
Under the current system, companies are responsible for assessing their own eligibility and providing investors with the documentation they need to claim relief. This places real responsibility on the business to get things right. If the conditions are breached during the holding period, for example if the company stops trading or the shares are redeemed early, investors could lose their relief, which can damage relationships and your reputation.
Good record keeping, careful structuring of the share issue and ongoing monitoring of the conditions are therefore essential throughout the life of the investment.
Related Reliefs for Founders
EIIS is not the only relief available to growing businesses. For founders leaving employment to start a company, the Start-Up Relief for Entrepreneurs scheme may allow them to claim a refund of income tax previously paid when they invest their own money in their new business. Combining different reliefs and funding sources can help build a stronger overall funding package.
Preparing to Raise Investment
Before seeking EIIS investment, make sure your business is investor ready. That means up-to-date financial accounts, realistic financial projections, a clear business plan, a sensible company valuation and a well-drafted shareholders’ agreement. Investors will scrutinise these carefully, and a well-prepared business will inspire far greater confidence.
Unlock Growth With the Right Funding
EIIS can be a powerful tool for Irish SMEs looking to grow, giving investors a strong incentive to back your business while allowing you to retain control. With careful planning and proper compliance, it can help turn your ambitions into reality.
At The Leinster Partnership, we help businesses assess their eligibility for EIIS, prepare for investment and manage the ongoing compliance requirements with confidence.
If you would like to discuss your business, contact us on or email info@leinsterptnrs.ie or visit leinsterptnrs.ie.
Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.