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Starting a New Company in Ireland: Startup Grants and Tax Benefits

Startup Grants and Tax Benefits for SMEs

By Shannon Power, 29th May 2024

As you are no doubt aware, Ireland continues to be a prime destination for company startups due to its favourable tax regime and robust support system for entrepreneurs. Understanding the available tax benefits and grants for startups can significantly enhance your financial planning and strategic decisions if you’re considering launching your venture in the Emerald Isle.

Tax Benefits for Startups in Ireland

  1. Reduced Corporate Tax Rate:

Ireland boasts one of the lowest corporate tax rates in Europe at 12.5% for trading income, which is a major attraction for both multinational companies and startups. Non-trading income and income from an excepted trade are taxed at a higher rate of 25%.

New companies may be able to apply for tax relief for start-up companies with the Revenue Commission. This tax relief, or Section 486C tax relief, is a reduction of your Corporation Tax for the first five years you trade. You may be entitled to relief if your CT due is €40,000 or less in a tax year. If your CT due is between €40,000 and €60,000, you may be entitled to partial relief.

  1. Startup Relief for Entrepreneurs:

Revenue also offers the Startup Relief for Entrepreneurs (SURE) scheme to new businesses which provides a refund of Income Tax that you paid in previous years. You can claim the relief if you are starting your own business and you are:

  • an employee
  • an unemployed person
  • a person who has recently been made redundant.

  1. R&D Tax Credits:

From the 1st of January 2024, Ireland offers a 30% R&D tax credit on qualifying expenditures to encourage innovation. This credit can be applied to offset a company’s corporation tax liability or be refunded in cash if the company is in a loss-making position.

  1. Employment Investment Incentive Scheme (EIIS):

EIIS is a mechanism for start-ups and young businesses in Ireland to receive investment that is tax efficient for the investor. This makes investment in your company more attractive, providing income tax relief for eligible individual investors who buy new shares in EIIS-qualified SMEs. The standard investment period is four years, and investors can claim relief of up to €500,000.

Through the scheme, a taxpayer who invests in an approved EII investment can significantly reduce their taxable income for the year in which the investment was made.

  1. Capital Gains Tax (CGT):

The standard rate for CGT is 33%, but the Entrepreneur Relief reduces the rate to 10% on disposals of qualifying business assets up to a lifetime limit of €1 million.

In 2024, a new CGT relief was introduced for ‘angel investments’ in innovative start-ups, offering a reduced rate of 16% (or 18% through a partnership) on qualifying investments, capped at 200% of the investment made, with a lifetime gains limit of €3 million.

Available Grants for Startups

  1. Enterprise Ireland:

Enterprise Ireland provides a range of grants aimed at innovative startups with high growth potential:

  • HPSU Feasibility Study Grant: Offers 70% of eligible expenditure or up to €30,000 to help with the costs of a feasibility study to evaluate the viability of a business strategy.
  • Pre-Seed Start Fund: Includes a €50,000 to €100,000 investment in the form of convertible loan note instrument for early-stage companies to develop market-ready products. The fund also includes 10 mentoring sessions and the appointment of an Enterprise Ireland Development Advisor.
  • Innovative HPSU Fund: Equity investment of up to €1,200,000 for startups developing new high-potential ideas, products, or technologies.
  • Innovation Vouchers: Provides €5,000 and €10,000 vouchers to assist SMEs in building connections with publicly funded Knowledge Providers in Ireland and Northern Ireland. These vouchers enable businesses to address various challenges and uncover new opportunities.

  1. Local Enterprise Offices (LEOs):

LEOs support early-stage businesses focused on the domestic market with various grants, such as:

  • Feasibility Study Grants: Up to €15,000 to assist the promoter with researching market demand for a product or service and examining its sustainability.
  • Priming Grants: Offers up to €150,000 to micro start-up businesses within the first 18 months of being set up. Priming Grants are available to eligible sole traders, partnerships, or limited companies with no more than 10 employees.
  • Business Expansion Grants: Offers up to €150,000 to businesses in their growth phase after the initial 18-month start-up period.

  1. Additional Support Programs:

  • HBAN (Halo Business Angel Network): Facilitates angel investment and offers guidance on pitching to investors.
  • Accelerators and Business Innovation Centres (BICs): Provides mentorship, workspace, and funding for innovative startups.

  1. Intellectual Property Support:

The IP Start Grant from Enterprise Ireland and LEOs helps startups with costs associated with protecting intellectual property, including patents and trademarks.

Navigating the Tax and Grant Application Process

Successfully navigating Ireland’s tax and grants for startups landscape requires meticulous planning and understanding of the criteria and compliance requirements. Here are some steps to help you:

  1. Consultation: Engage with a tax advisor or business consultant specialising in Irish regulations to ensure you maximise available benefits.
  2. Documentation: Maintain thorough records of all expenses and income, crucial for tax filings and grant applications.
  3. Application: For grants, carefully follow guidelines provided by LEOs, Enterprise Ireland, or relevant bodies. Pay attention to deadlines and required documentation.
  4. Compliance: Ensure your business complies with all regulatory requirements, including tax filings and employment laws, to avoid penalties and maintain eligibility for ongoing support.

Ireland’s supportive environment for startups, characterised by low corporate taxes and extensive grant opportunities, makes it a promising location for new businesses. By leveraging these benefits, entrepreneurs can significantly reduce their operational costs and accelerate their growth. Whether you’re a tech innovator or a traditional business, understanding and utilising the available tax incentives and grants can provide a strong foundation for your startup’s success in Ireland.

If you have any questions regarding any of the aforementioned grants and tax benefits, or have questions about setting up a company in Ireland in general, contact the Company Bureau team at +353(0)1 6461625 or fill out our online contact form.

Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change

Shannon Power

Marketing Executive – Shannon is responsible for our client communications including our monthly newsletters and managing our website. With a passion for graphic design, Shannon often designs logos and websites for our clients. If you would like to learn more about setting up business email addresses or building a website, don't hesitate to give Shannon a call.