Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

This introduces a new section 44. Section 44 introduces Chapter 6A into the Taxes Consolidation Act 1997 to legislate for a new targeted capital gains tax, CGT, relief for investment in innovative start-up SMEs. The relief aims to assist SMEs in attracting investment and making Ireland a more attractive location for angel investors. The relief is to encourage investors to acquire significant minority shareholdings in early-stage innovative companies that are less than five years old. It allows these investors to avail of a reduced rate of CGT on a sale to a third party. The investment made must be for a minimum amount of €20,000, or €10,000 where at least a 5% shareholding is acquired, and the shares acquired must be held for a minimum of three years. The reduced CGT rate of 16% is available on a gain of value equivalent to twice the value of the investor’s initial investment. An effective reduced rate of 18% applies to individuals who make the investment via a qualifying partnership. There is a lifetime limit of €3 million on gains that may avail of the reduced rate of CGT.

The relief is a form of permissible state aid and is drafted in accordance with Articles 21 and 21a of the general block exemption regulation, GBER. To ensure the relief complies with GBER and that the companies are innovative, the relief will be subject to a certification process. The companies must apply for the necessary certificates of qualification, which will issue from Revenue following consultation with Enterprise Ireland. A register of companies that have been issued with certificates of qualification will be published by Revenue on its website.

The new provision is subject to a commencement order to allow the systems necessary for the certification process to be established. I wish to signal that I will be bringing an amendment to this section on Report Stage to introduce additional provisions to facilitate the operation of the certification system.