Ireland: Country and Foreign Investment
Investments by Foreigners
Ireland has been extremely welcoming to foreign investment for a long time; the primary agency concerned, the Industrial Development Agency, began operations in 1949. The IDA offers practical assistance for incoming investors, and depending on circumstances can put together very favourable support packages including some or all of the following elements:
- non-repayable capital grants;
- training and research and development grants;
- loan guarantees;
- subsidised rentals;
- subsidised interest charges; and, occasionally,
- equity stakes.
In November 2004, Ireland's then Minister for Finance, Brian Cowen, announced that state aid approval had been received from the European Commission for two schemes aimed at helping new firms gain access to start-up capital.
Welcoming the EUs 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 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 EUR1 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 EUR750,000 in any six month period;
- The following sectors are 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.
The schemes became effective from 5 February 2004 and in line with the Commission approval originally operated until 31 December 2006. On 6 September, 2007, Cowen signed the Commencement Order bringing the schemes into effect from 1 January 2007 to 31 December 2013.
In summary, the Commencement Order and Regulations provide that as and from 1 January 2007, medium-sized enterprises may qualify if they are located in “assisted areas”. (Currently, the assisted areas are defined as all of the Republic of Ireland apart from Dublin, Kildare, Meath and Wicklow. From 1 January 2009, Cork City and county will be non-assisted, apart from Cork docklands). Medium-sized enterprises will benefit from the scheme if located in non-assisted areas only where they are in seed or start-up phase.
The government proposed in the 2010 Finance Bill, approved in January 2011, to replace the BES with the Employment and Investment Scheme (EEI), which removed the qualifying trades’ limitations and open up the scheme to the majority of small-sized trading companies and medium-sized trading companies. The intention of the removal of the qualifying trade limits is to encourage investors to invest in a broad range of companies, and to enable these companies to generate and maintain employment. The maximum amount that can be raised by companies in a 12 month period was increased from EUR1.5 million to EUR2.5 million, and the lifetime amount that can be raised per company was increased from EUR2 million to EUR10 million. The certification process was also simplified, among other changes. The EEI scheme was approved by the European Commission and replaced the BES from November 25, 2011, running alonside the BES scheme until the end of 2011.
In early 2008, Ireland's Minister for Enterprise, Trade and Employment, Micheal Martin, announced the launch of a revised and simplified Research and Development Grant Scheme, which it was planned would make EUR500m available to companies across all sectors.
The funding is made available over the remainder of the Government's Strategy for Science, Technology and Innovation period (2008-2013). Some notable features of the R&D scheme include: a simplified application process; enhanced support from R&D novices right up to R&D experts; a new R&D investigation and stimulation phase; the elimination of repayable grants; the opening of funding to services companies; the encouragement of collaboration with other companies and third level institutions; and a special focus on SMEs with increased funding rates and more flexibility.
In unveiling the scheme, Minister Martin explained that: "This Government investment of over EUR500 million will ensure that Irish companies remain at the cutting edge of research and development into the future, and that we have an innovative economy which will continue delivering jobs for our people.
"In line with Government policy to cut red tape for business the new grant scheme will also be streamlined to make the application process as straight-forward as possible for companies."