The European Commission has given its approval for the extension of the Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS).
The Minister for Finance, Mr Cowen, welcomed the Commission's decision saying there is a "strong business case" for the schemes.
The BES provides a tax incentive to invest long-term equity capital in companies, operating in certain sectors of the economy. Provided an investor holds the investment for a minimum period of five years, the BES provides individual investors with tax relief, at their marginal tax rate, in respect of investments of up to €31,750 per annum.
The SCS provides a refund of tax paid in previous years to employees who leave employment and start their own business. For any particular year, the refund is limited to the tax the individual has paid in the previous six years, subject to an investment limit of €31,750 per annum with an overall investment limit of €182,240.
Not surprisingly, IBEC welcomed the announcement.
IBEC senior economist, Mr Aebhric McGibney said the schemes address "a critical market failure by acting as an essential financial tool for companies in the early stages of their development".
Arrangements are now being made to have the necessary legislation signed by the Minister bringing the schemes into effect until December 31st 2006 in line with the Commission approval.
Approval from the European Commission was required under Article 88 of the EC Treaty which covers rules on State aid to companies.