Employment and Investment Incentive Scheme (“EIIS”)
Frequently Asked Questions
- What is the EIIS?
The EIIS is a tax relief incentive scheme which enables investors to deduct the cost of their investment from their total income for income tax purposes.
- Are investors interested in the EIIS?
Each year over €40 million was invested through the EII scheme in 80-100 companies. This has been much higher in previous years and we are expecting this figure to grow to €60m per annum over the next couple of years. Although contributing to a Pension scheme provides tax relief too (similar to EII), neither provide the potential to see growth in the invested capital combined with a return in the investment within a 4 year period
- Why focus on Green Sector Investments?
BVP sees Green business as an emerging sector in the Irish economy and anticipate that it will become mainstream over the next few years. We define Green companies as those engaging in business with a focus on energy efficiency and resource optimisation for industry.
- What is the term of an EIIS investment?
The minimum investment period is four years from the date the fund invests in the respective companies.
- What is the tax relief an investor obtains?
With only the tax relief and a straight return of capital an EII investment provides an annual return of 10% over a 4 year period. This is based on a tax payer at the 40% rate. The relief is split into 30% relief receivable upon making the investment and the remaining relief (currently 10%) receivable within 4 years of holding the investment. The latter relief is subject to some employment or research and development criteria being maintained.
- What is the limit on the amount of investment on which relief can be obtained?
An individual investor can obtain income tax relief on investments minimum of €5,000 and up to a maximum of €150,000 per annum in each tax year up to 2020. A married couple may each invest individually.
- How much will my investment cost me?
Investors are liable to a commission of 3% of the full amount invested in the fund. There are no further charges.
- What are good investments for Investors?
Making a good investment in a trading company requires a number of components to be brought together at one time. This is why appointing an Investment Manager provides a better potential for your money to find the “right home”. First and foremost, a company led by the right people makes all the difference – experience, integrity and transparency. In most cases, the Investment Manager works with the Promoters of the company for many months prior to an investment happening.
Thereafter identifying financial stability and growth potential are key ingredients and a potential for an investor exit at the end of the investment period. Once the investment is made, the Investment Manager monitors the company closely, in some cases even joining the board of directors. Patience and staying the course are essential to rounding off a good investment.
- Who is the Manager of the fund?
The Fund is managed by BVP Investments Ltd. a private company established for the purpose of managing a Designated Investment Fund.
- Who is the Trustee to the fund?
The fund has appointed Capita Corporate Trustees Limited (‘Capita’) as trustee of the fund. Capita is a subsidiary of Capita Plc, the publicly quoted Dublin based financial services group.
- Do I have to invest in one company only?
A Fund like BVP’s will spread the investment across a diverse range of companies and the role of the Manager should provide an extra level of transparency at the beginning, during and at the end of the investment period.
- When are EIIS investments made?
EIIS investments are made before year end to avail of tax relief for income earned in that year.
BVP will be coming to market with a number of EIIS investment opportunities in Q4 2016.
- What type of client is this suitable for?
An individual with a taxable income liability in the year the EIIS investment is made. Taxable income includes (1) PAYE earnings (2) rental income from property held in a personal capacity (3) bank deposit interest income and (4) ARF distribution income.
- Can directors in a company get tax relief when extracting profits to make an EII investment?
Directors can in most circumstances avail of an EII investment with a small amount of planning. It should be noted that they will most likely get income tax relief at the 40% rate but will be required to pay their PRSI and USC on any payments made to them.
- When can I get my tax relief back?
Initial 30% tax relief is obtained for the year the investment is made, i.e. for an investment made in 2016, the investor will get 30% relief in his/her 2016 tax return (usually filed in 2017).
The remaining 10% tax relief is obtained after year 4 of the investment, i.e. for an investment made in 2016; the investor will get final 10% relief in their 2020 tax return.
- What additional criteria must the company meet in order to avail of the final 10% relief?
The extra 10% relief is earned once the company meets the employment or research and development criteria. BVP as Investment Manager will require the company to commit to fulfilling the requirements of the legislation.
- Can an investor expect to make a return above his/her tax relief?
Most EII investments available on the market seek to generate a return above the tax relief.
At BVP we are targeting an annual return of 15% (i.e. 4% above the tax relief only rate of return) for BVP’s 10th Green EII Fund.
- Is my investment capital guaranteed?
The tax relief, as described above, provides a guarantee on a portion of the Capital. For example, in the case of a €30,000 investment, 30% of the investment i.e. €9,000 is the guaranteed element and 10% of the investment i.e. €3,300 is reasonably assured subject to conditions.
The balance of the Capital can be further protected (but not guaranteed) with a spread of investments across a number of companies within a portfolio.
- Can I exit the investment during the four years if I need liquidity?
No. An early exit will result in claw back of any tax relief obtained.
- How do I get an update on the performance of the company during the investment term?
Bi-annual reports for investors and an Investor Conference held every year to update our existing investors
- Will I own shares in the company?
Yes. Investment will be by way of ordinary share capital in the investee company. BVP’s Trustee Capita Corporate Trustees Ltd, part of Capita plc, will hold the shares on the investors’ behalf.
- How do I claim back my tax relief?
Revenue will issue EII 3 Form to the investee companies and the companies will pass this onto BVP who will accumulate them on an EII5 form before forwarding it onto investors. Investors will submit this form to their local Revenue office or Accountant to process the claim for relief.
With regard to the 10% relief obtained once the shares have been held for a minimum of 4 years after the investors’ subscription, the process to claim this relief is identical to that as outlined above. Revenue will issue an EII 3A form (typically 3-6 months post expiry of 4 year term) and investors then submit this form to their local Revenue office or Accountant to process the claim.
- What is the exit process for my Investment?
The Manager will co-ordinate the Exit of the Fund after expiration of the Minimum Investment Period by seeking to make arrangements with the Board of Directors of each of the Investee Companies/projects for the realization of the Investee Companies for the realization of the Fund’s investments. These may include:
- a sale of the shares on the Irish Stock Exchange or any other recognized securities market, if such share are listed;
- an acquisition or take-over;
- a private placing, e.g. a trade sale;
- a repurchase or redemption by the Investee Company of its own shares;
- a sale of the EII shareholdings to the promoters of the Investee companies;
- the exercise of a call or put option at market value with the promoters of the Investee Companies; and/or;
any other method of realization which may, in the opinion of the Manager, be appropriate at that time
- What happens if the investee company performs badly?
A Designated Investment Fund like BVP’s EII fund has an Investment Manager to represent the interests of the Investors throughout the investment period. Investors will still obtain full tax relief (once conditions have been met), however the value of the shares may have declined due to poor performance by the company.
The company will redeem the shares at market value after year 4.
- What paper work do I need to complete to invest in the EIIS product?
Our Information Memorandum and Application Forms are available by contacting BVP. These outline all relevant information and the terms and conditions for the 10th BVP Green EII Fund.
We are now accepting applications for the 10th BVP Green EII Fund. To subscribe to the fund, please
- complete the Application Form and submit to BVP Investments Limited, Unit 23, The Cubes 2, Beacon South Quarter, Sandyford, D 18 K6Y6.
- completed application forms must be accompanied by a personal cheque or bank draft drawn on an applicant’s own bank account, payable to Capita Corporate Trustees Limited a/c 10th BVP Green EII Fund.
- Please note the total amount must include the investment amount plus commission of 3%.
- Certified copy of ID (passport or drivers license).
- Two original utility bills not more than 6 months old.
If you would like to find out more about the EII Scheme or about BVP’s 10th Green EII Fund, please call us on (01) 657 2900 or email us on email@example.com.
Further information can also be found on our website www.bvp.ie.