Dividend from the Estonian company – rules of distribution

Verify if the company has paid-up share capital

In order to pay out a dividend from an Estonian company the minimum share capital of 2500 euros has to be paid in advance. When establishing a company in Estonia, you have the possibility to postpone the payment of the share capital until after the whole process of registration is completed. This may lead to a situation in which the company operates despite unpaid share capital. Therefore, before you decide to pay out a dividend make sure that the share capital had been fully paid.

Make sure you have met all the formal requirements

The payout of dividend is made on the basis of the financial result shown in the annual report. That’s the reason why the Estonian company’s annual report has to be accepted and signed by all members of the board. In addition, make sure that the amount you wish to pay out does not exceed the retained/not distributed profit shown in the company’s annual report. Moreover, you should ensure that after the pay out of the dividend company’s net assets will not fall below the value of the paid-in or minimum share capital – depending on which of these values is higher. If you met all the conditions mentioned above, you can proceed to the next step.

How does the process of the dividend payout look like?

The decision on the payment of the dividend is made by the General Meeting of Shareholders on the basis of the annual report. Mentioned decision takes the form of a resolution which should be adopted by the required majority of votes. It is worth noting that the articles of association may require a stricter majority of votes than it is specified in the Estonian Commercial Code. Therefore, this issue should be considered individually for each entity.

After the decision of paying out the dividend is made, the Estonian company pays out the amount indicated in the resolution to bank accounts of the shareholders or partners.

Payout of the dividend – What’s next?

You should remember that a decision itself to pay out a dividend is an economic event which, according to accounting rules, should be recorded in the company’s accounting books. Moreover, the moment of the dividend payout should also be included in the books. The company has to show the dividend paid out in the attachment No 7 to the TSD tax declaration. The dividend tax must be paid by the 10th of the month following the month of the actual payment.

In conclusion, the dividend payout from the Estonian company is based on clear and transparent rules and should not generate any problems. If you meet the basic requirements, all you have to do is prepare a resolution and enjoy the paid-out funds.