New angel investor relief
Under the Finance Act 2023, angel investors can now benefit from lower Capital Gains Tax (CGT) rates when they invest in small and medium-sized enterprises (SMEs).
Here’s a simplified overview of the key points and eligibility requirements:
Angel Investors:
These are private individuals or groups who provide capital for startups, particularly in tech and innovation. They may receive management roles and equity in the company in return.
Tax Advantage
Previously, gains on assets were taxed at 33%. Now, angel investors can enjoy reduced rates of 16% for individuals and 18% for partnerships. To qualify for the reduced CGT rates, investors must meet certain criteria:
criteria
Investment Requirements: Must invest in fully paid, newly issued shares worth at least €10,000. Must hold these shares for a minimum of three years. The investment should represent between 5% and 49% of the company’s ordinary shares. Investor Requirements: Must not own a significant part of the company when applying for the relief. Company Requirements: The business must be a startup, innovative, and classified as an SME.
Financial Caps
The reduced CGT rate applies to gains up to twice the initial investment value. There’s a maximum lifetime limit of €3 million per investor.
Considerations to take into account
Not all angel investments qualify; they must align with the specific criteria outlined. Planning and documentation, including a business plan and certification from the Revenue Commissioners, are necessary to prove eligibility.
This new tax relief aims to encourage more investment into innovative startups by offering significant tax savings to angel investors, though it requires careful adherence to the stipulated conditions.
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Author..
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Contact Email: john@solve.ie
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