So many investors do not invest in small enterprises, pointing out their small market, and non-reliable history, resulting in delayed opportunities for these enterprises to become national, large or global level organisations, and this leads to the dead end no matter how hard they try.
To compensate and change the mentality of the investors, the concerned authorities started an enterprise investment scheme, which will create opportunities for small-scale industries to expand their horizons by helping them in the collection of funds.
The whole funding cannot be generated by the government but authorities could attract investors to invest in the scheme, that is what EIS have done so far.
Enterprise investment scheme is a federal tax relief scheme for people who invest in small-scale enterprises. Here the term federal tax relief means the tax relaxation will be the product only to those beneficiaries who will invest in the mentioned industries.
We have seen that raising capital for small industries and riskier industries is so difficult. The rate of growth as compared to small industries as every investor wants to safely invest, and generate as much profit as he can, but EIS provide investors tax reliefs, which is a sort of incentive to the investors who purchase the EIS shares. Approximately 30% of the money invested under EIS is returned to the investors along with a tax relaxation of a year under the said terms and conditions.
In a financial year, investors can invest in an EIS, as much and how much they like there is no limiting line set up for them in return the authorities provide them with their relaxation, and up to 30 % of relaxation can be claimed by the investors if the investment amount is one million euros.
If one buys EIS shares of knowledge-intensive companies an additional relief of 30% on one million euros is also granted. Further, which companies are the knowledge-intensive companies the detailed list is provided on the legal notice of the EIS scheme.
For any share that is held for about three years, the capital gain tax disposal is provided on the claimed shares. If an investor disposes of the shares at a loss then the tax reduction amount is the remaining amount deducing the tax relief and further the previous year’s income is also included.
EIS makes generating funds and capital for the riskier and small-scale industries a bit easy by encouraging investors to invest in the said industries that are further registered under the scheme. Further to be the beneficiaries of the Enterprise investment scheme the investors need to hold the shares for around three years, not less than three years would be considered for tax relaxation.