European Commission to remove tax obstacles to cross-border venture capital

The European Commission has been looking at ways to facilitate cross border venture capital ("VC") investment within the EU so that the industry is capable of providing early-stage equity finance to the EU's most innovative high-growth small and medium-sized enterprises (SMEs).

A significant part of VC capital is invested in life sciences and healthcare, representing an estimated 20.3% share of the 2008 VC investment distribution. Venture capital investments are typically made via an investment fund (commonly in a form an unincorporated arrangement) and the fund is typically managed by a fund manager.

One of the main reasons identified for the EU's VC market under performance is the lack of cohesion between the 27 tax systems across the EU. The Commission has now published an interesting report compiled by a group of 33 independent tax experts across the EU, that both identifies the tax problems cause by such lack of cohesion and recommends possible solutions.

Lawyers Nikol Davies, David Mardle