When you establish a limited company in Estonia, you are also required to register its minimum share capital. This is referred to as your company's share capital contribution.
It’s important to remember that minimum share capital is not a fee. It’s your money that goes into your company to spend on business activities. Consider it 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 is €2500.
- The minimum nominal value of a share is €1.
- Once the share capital has been transferred to your company’s bank account and registered in the Estonian Business Register, you may use the funds for business activities.
- You cannot pay dividends from your share capital contribution. You can only pay dividends on company revenue and once you have registered share capital.
- It is possible to defer the payment of share capital into the future. However, when doing so, all the founders of the company will be held personally liable for the deferred amount.
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 at a credit or payment institution anywhere within the European Economic Area (EEA). You can learn more about this change here.
The suggested process for e-residents would be to postpone the payment and establish a company without making a share capital contribution during the establishment process. 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 the company. A note about not having paid in the capital will be included in the Company Register next to your company’s name, which will be visible to everyone.
- until you haven’t completely paid the contribution, you 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 „Osakapitali sissemakse“ (meaning „Share capital contribution“) to each separate transaction.
In order to finalize this process, you need to log in to the Company Registration Portal and submit an application to change the data of your enterprise. 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.
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 Company 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.
Generally, it takes a couple of 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. The full version of the Business Guide will be available for download shortly.
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.