State aid: Commission approves €2 million Cypriot scheme to support private investments into innovative SMEs

The measure contributes to the implementation of Cyprus's Recovery and Resilience Plan (‘RRP'), as positively assessed by the Commission and as adopted by the Council, in the context of the Recovery and Resilience Facility (‘RRF'). The support will take the form of an income tax relief in favour of private investors, both natural persons and corporate investors, who decide to invest into early-stage, innovative SMEs. Investors providing finance to eligible companies may receive a tax relief of up to 30% of the amount invested, with an overall cap to such tax relief that cannot exceed 50% of their total taxable income, up to a maximum of €150,000 per year and of €750,000 within five years from the investment. The scheme will run until 31 December 2023. The Commission assessed the measure under EU State aid rules, and in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities under certain conditions, as well as under the 2021 Risk Finance Guidelines. This is the first decision to be adopted under these recently revised Guidelines. The Commission considers that the fiscal incentive is a necessary and appropriate instrument to foster the underdeveloped venture capital market in Cyprus. Furthermore, the Commission found that the aid will be proportionate, i.e. limited to the minimum necessary, thanks to the caps mentioned above. The Commission concluded that the positive effects of the scheme on providing additional risk finance to innovative SMEs in Cyprus outweigh any potential distortions of competition and trade brought about by the support. On this basis, the Commission approved the measure under EU State aid rules. The Commission assesses measures entailing State aid contained in the national recovery plans presented in the context of the RRF as a matter of priority and has provided guidance and support to Member States in the preparatory phases of the national plans, to facilitate the rapid deployment of the RRF. The non-confidential version of the decision will be made available under the case number SA.63127 in the State aid register on the Commission's competition website once any confidentiality issues have been resolved.