The European Commission has announced that it has approved an estimated two million euro Cypriot scheme to support private investments into innovative small and medium-sized enterprises (SMEs), which will contribute to the implementation of the country’s Recovery and Resilience Plan.

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.

The scheme provides investors who finance eligible companies with 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 decided that the fiscal incentive provided by the scheme is “a necessary and appropriate instrument to foster the underdeveloped venture capital market in Cyprus”, having also found that “the aid will be proportionate, i.e. limited to the minimum necessary”.

“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” according to the Commission’s assessment.

The Commission assesses measures entailing State aid contained in the national recovery plans presented in the context of the Recovery and Resilience Facility (RRF) as a matter of priority.

The country’s Recovery and Resilience Plan was positively assessed by the Commission in the context of the RRF, and adopted by the Council.

The Commission assessed the measure under EU State aid rules, and in particular the relevant article 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.