When you establish a private limited company in Estonia, you are also required to register its minimum share capital of €2500.
Please note that share capital contribution is not a fee. It belongs to your company and can be used to pay for business activities. Consider it to be an investment into your business that helps build greater confidence in both your company and the Estonian business ecosystem.
- According to the Estonian Commercial Code, the minimum required share capital for a private limited company is €2500. As this is the minimum share capital amount, you can of course choose to pay in and register even more as share capital.
- The minimum nominal value of a share is €0.01. In case the nominal value of a share is greater than one cent, then it shall be an exact multiple of one cent.
- Once the share capital has been transferred to your company’s bank account with a credit or payment institution within the European Economic Area (EEA) and registered in the Estonian Business Register, you may use these funds for business related expenses.
- It is important to declare a share capital at the Estonian Tax and Customs Board. If you would decide to close your company at some point, this would allow you to pay out the share capital tax free.
- You cannot pay dividends from your share capital contribution. You can only pay dividends from company's revenue and once you have paid and registered the share capital.
- If all founders of a company are private persons, it is possible to defer the payment of share capital for up to 10 years except for one exception — if you choose to set your share capital above €25,000 then it can’t be deferred. Please note that until share capital is registered, those who have received the shares are personally liable up to the amount not paid in and no dividends can be issued.
How to register share capital
Previously, your ability to register share capital was limited exclusively to Estonian banks. The good news is that since the Estonian Commercial Code was revised in January 2019, the share capital can also be registered with a credit or payment institution anywhere within the European Economic Area (EEA) which includes all EU countries plus Iceland, Liechtenstein and Norway. You can learn more about this change here.
If all founders of a company are private persons, the suggested process for e-residents would be to postpone the payment and establish a company without making a share capital contribution at the moment of company registration. This is because, in principle, the share capital contribution can be made either by transferring funds to the company’s start-up bank account or to the designated depository bank account of the Company Registrar. In practice, however, using one of the two alternatives is more suited for Estonian physical residents, who already have a relationship with an Estonian bank.
A few things to keep in mind when opting for a deferred share capital contribution:
- the planned share capital cannot exceed EUR 25,000 and a respective note has to be made in the Articles of Association of a company. A note that your company was “established without making contribution” will be included in the Company Register next to your company’s name, which will be visible to everyone.
- until the minimum share capital contribution has been paid in full amount, company founders remain personally liable for the company’s obligations in the amount of the unpaid part. The company is not allowed to pay out dividends and increase or decrease the share capital but is allowed to make salary payments.
After you have registered your company and have obtained a banking service provider (a bank or a fintech account within the EEA) you are now able to make a deferred share capital contribution by transferring necessary funds from your private account to the company’s bank account.
It is possible to complete the payment in a single transaction or divide it into multiple smaller instalments. In both instances, it is necessary for you to add an explanation in Estonian „Osakapitali sissemakse“ (meaning „Share capital contribution“) to each separate transaction.
You also need to provide the Company Register with proof that payment to the company’s bank account has indeed been made. A digitally signed statement (confirming the payment) may be requested from your financial services provider. In addition to having a digital signature, the statement should be in Estonian and meet the requirements of the Business Register.
If your financial services provider is not an Estonian bank or a fintech company with necessary capabilities (i.e. able to provide you with a digitally signed statement in Estonian), the payment verification process may become a little more complex. In this scenario, you need to ensure that the statement provided by your financial services provider is notarised into a document that is in line with the requirements described above. If you are unsure about registering your share capital, business service providers can advise and guide you through the process.
In order to finalise this process, you need to log in to the Company Registration Portal and submit an application to change the data of your company. The whole procedure is quite straightforward and takes just a few guided steps to complete. However, altering your company’s information requires you to pay an additional state fee in the amount of EUR 18.
Generally, it takes up to 5 working days for the registration department to review the application and register the share capital contribution. Make sure to also declare the share capital contribution on Annex 7 of form TSD, so you can make tax-exempt distributions in the extent of paid-in capital in the future.
Learn more about share capital contribution on our blog.
This article is part of a Business Guide
This article is a part of larger set of guidelines that e-Residency project team has requested for you and that has been compiled in cooperation with AS PwC. Download the full version of the Business Guide.
Articles in the Knowledge Base and the Business Guide are intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. This information should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers.