Paying a dividend from an Estonian OÜ: the steps, the limits and the TSD

A dividend from an Estonian private limited company (osaühing, OÜ) follows a fixed order: an approved annual report, a shareholders' resolution, then the payment. Company law sets how much you may pay. Tax law sets when the company pays income tax on it and how it goes on the TSD. This guide covers both sides, for a founder or an e-resident who runs the company alone or with a few partners.

In short

• Pay a dividend only on the basis of an approved annual report, and adopt the shareholders' resolution before you pay.
• Two tests limit the amount: the distributable profit in the approved report, and the net assets after the payment.
• An OÜ has no interim dividend. It can pay at any time of the year, but only out of the last approved report.
• The company pays 22/78 of the net dividend as income tax. It files the TSD with annex 7 and form INF 1, and pays the tax, by the 10th of the month after the payment.
• A declared but unpaid dividend is not taxed yet. A set-off, or a conversion into a loan, counts as a payment.
• A shareholder must return an unlawful dividend, and the board members who caused it are liable with him.

What are the steps to pay a lawful dividend from an OÜ?

The board prepares the annual report and a profit distribution proposal. The shareholders approve the report and adopt a resolution that fixes the dividend. The board then pays it, and the company declares the payment and pays the tax by the 10th of the next month.

1. Annual report. After the financial year ends, the board prepares, approves and signs the annual report (Commercial Code § 179; Accounting Act § 25). If the company is audited or reviewed, the auditor's report is attached. See the annual report guide.
2. Proposal. The board gives the report and a profit distribution proposal to the shareholders. The proposal states the net profit, the transfers to reserves and the amount to pay to shareholders (Commercial Code § 179 and § 332).
3. Resolution. The shareholders approve the report and decide the distribution of profit (Commercial Code § 168). The resolution rests on the approved report and fixes the amount. From then on, each shareholder can demand payment (Commercial Code § 157 and § 335). A sole shareholder signs a written resolution with his name, his votes and the date, with no meeting (Commercial Code § 173).
4. Limits. Before the payment, the board checks the two tests in How much can the company distribute?
5. Filing. The approved report, with the profit distribution proposal, goes to the Business Register within six months of the end of the financial year (Commercial Code § 179; RIK).
6. Payment and tax. The dividend is paid in money, or in other assets with the shareholder's consent (Commercial Code § 157). The tax arises on the payment (Income Tax Act § 50). See When is the dividend declared on the TSD?

Common mistakes: paying first and signing the resolution months later; a resolution whose amounts and dates do not match the books; paying out of the current year's profit before that year's report is approved.

How much can the company distribute?

Two tests apply together. The dividend must come from the profit that the last approved report shows. After the payment, the net assets must not fall below the share capital plus the reserves that may not be distributed.

Distributable profit. The ceiling is the net profit of the last approved year plus the retained earnings of earlier years, minus the uncovered losses, as the approved report shows them (Commercial Code § 157(1)). Every dividend resolved since the balance sheet date of that report uses up part of the ceiling. Share capital, share premium and the legal reserve are not distributable (Commercial Code § 155 and § 161).

Net assets. The net assets (assets minus liabilities, that is equity) must not be, or become through the payment, less than the share capital plus the reserves that the law or the articles make undistributable (Commercial Code § 157(3)). If the articles provide for a legal reserve, it is at least 1/10 of the share capital. Until the reserve reaches that size, at least 1/20 of each year's net profit must go to it, which reduces what you can distribute (Commercial Code § 160).

Count the tax too. The income tax on the dividend also leaves the company. It is recognised as a liability and an expense when the dividend is declared (Accounting Standards Board guidelines, annex 8, point 46). The safe reading counts the dividend and its tax together in both tests.

Example. Share capital 2 500, no reserve in the articles, retained earnings 40 000 in the approved report. A net dividend of 31 200 costs 8 800 of tax (31 200 x 22/78), 40 000 in total. The retained earnings cover it, and the equity after the payment is 2 500, equal to the share capital. Anything more fails on the safe reading (Income Tax Act § 4). The dividend tax calculator computes the tax.

Further blocks.

• If development costs are capitalised and not fully amortised, no profit may be distributed unless the distributable reserves and retained earnings at least equal the unamortised amount (Commercial Code § 157(3.1)).
• An OÜ founded without paying in its share capital may make no payment to shareholders, other than salary and fees, until all contributions are paid (Commercial Code § 520.1).
• The board must act with the care of a prudent businessperson (Commercial Code § 187). If losses since the balance sheet date have eaten the equity, do not pay even if the old numbers allow it. Once the company is insolvent, the board may not make a payment that a prudent businessperson would not make, and the board members must reimburse any such payment (Commercial Code § 180(5.1)).

Can an OÜ pay an interim dividend during the year?

No. The Commercial Code allows payments to shareholders only on the basis of an approved annual report (Commercial Code § 157(1)). The advance dividend rule of the Code is only for the public limited company (AS), and it applies after the year ends, not during it (Commercial Code § 277).

What an OÜ can do:

• Pay at any time out of the last approved report. Once the report for year N is approved, the shareholders may resolve a dividend in any month from the retained earnings shown there, within the two tests. A second dividend in the same year may use only what the first one left.
• Pay between the year end and the approval of the next report. The last approved report is still the basis. The payment then reduces what you can distribute under the next report, whose balance sheet does not show it yet.
• Return capital. Paid-in capital goes back to shareholders during the year only through a reduction of share capital, with its procedure to protect creditors. Share premium may only cover losses or fund a bonus issue (Commercial Code § 155(2)).

A mid-year payment that relies on the current year's unapproved profit is an unlawful distribution, and it is still taxed on payment.

Can a dividend be paid in instalments?

Yes. The resolution may fix the total and a schedule, or let the board pay in parts by a final date. Each instalment is taxed and declared for the month in which it is paid.

The resolution creates the company's debt to each shareholder (Commercial Code § 157(4)), and the law does not require one single payment. Good practice:

• adopt one resolution before the first payment, with the total per shareholder and the schedule or the final date;
• check the two tests for the total, with its full tax, at the time of the resolution, and check again before a later instalment if the company made losses;
• book the full dividend and its tax when declared, then reduce the payable with each payment (Accounting Standards Board guidelines, annex 8, point 46).

The tax period is the calendar month, and the tax arises on payment (Income Tax Act § 3 and § 50). So each instalment goes on the TSD of its own month. Several payments to the same shareholder in one month go on one line of form INF 1 (EMTA annex 7 guide). An unpaid remainder is not taxed until it is paid, set off or turned into a loan.

Can shareholders get dividends that are not in proportion to their shares?

Only if the articles of association provide for it. By default, each shareholder gets a dividend in proportion to the nominal value of his share (Commercial Code § 157(2)). The articles may give a share or a shareholder special rights to profit (Commercial Code § 154.1).

So a different split needs two things:

1. a clause in the articles, adopted by at least 2/3 of the votes (or more if the articles say so) and in force once it is registered (Commercial Code § 174 and § 175); and
2. a profit distribution resolution that follows that clause.

To remove or change an existing special right, every holder of that right must consent, unless the articles say otherwise (Commercial Code § 154.1(2)).

A one-off resolution that ignores the articles breaks the rule of equal treatment (Commercial Code § 154). A shareholder who did not take part in the resolution, or whose objection was recorded, can challenge it in court within three months (Commercial Code § 178). A waiver is no way around this: a shareholder who waives his dividend ends only his own claim, and the amount stays in the company.

The company pays the same 22/78 on the total paid, whatever the split (Income Tax Act § 50).

Can a dividend be paid in kind or set off against a shareholder's debt?

Yes, both, with limits. A dividend in kind needs the shareholder's consent and is taxed at the market value of the asset. A set-off against the shareholder's debt counts as a payment on the date of the set-off.

In kind. With the shareholder's consent, the company may pay the dividend in other assets, such as shares in a subsidiary, securities, a car or real estate (Commercial Code § 157(5)). Points to handle:

• The resolution names the asset, its value and the shareholder's consent.
• The tax point is the transfer of ownership. If the market value is higher than the profit distributed, the market value is declared, and the tax is 22/78 of it (TSD regulation, annex 8; EMTA).
• Ownership passes in the form the law sets for the asset. A car or other movable passes on delivery with an agreement that ownership passes, or by the agreement alone if the shareholder already holds it (Law of Property Act § 92). Real estate needs a notarised contract and an entry in the land register (Law of Property Act § 64.1 and § 120). Shares in an Estonian OÜ need a notarised transfer, unless the share capital is at least 10 000 euros, fully paid, and the articles waived that form (Commercial Code § 149 and § 150).
• The value must pass the two tests.
• A VAT-registered company that transfers goods makes a supply, so check the VAT on it (VAT Act § 4).

Set-off. The shareholder's claim to the dividend and the company's money claim against him can be set off by a declaration to the other party, if the company's claim is due (Law of Obligations Act § 197 and § 198). EMTA treats a set-off as a payment, so it goes on annex 7 and INF 1 for that month (EMTA annex 7 guide). Record it in a dated document signed by both sides.

Limits:

• A set-off cannot cover the company's claim to get back an unlawful distribution (Commercial Code § 158(4)).
• A loan from the company to a shareholder with more than 5 percent, or to a board member, is void, with a narrow group exception (Commercial Code § 159). A set-off does not repair such a loan. A loan to a shareholder can also be taxed as a hidden profit distribution (Income Tax Act § 50.2).

Can a declared dividend stay in the company as a loan?

Yes, but then it is taxed as paid. A declared dividend that simply stays unpaid is a debt of the company, and no tax arises yet. Turning it into a loan from the shareholder is a payment for tax purposes.

Unpaid. After the resolution, the company owes the dividend and books it as a liability (Commercial Code § 157(4)). The tax arises only on payment (Income Tax Act § 50(1)). This does not lock in a tax rate: the rate of the month of payment applies. The limitation period of the claim is not settled: three years if it counts as a claim from a transaction, ten years if it counts as a claim from law (General Part of the Civil Code Act § 146 and § 149). Pay or acknowledge an old dividend in writing.

Converted into a loan. If the shareholder and the company agree that the dividend debt becomes a loan, EMTA treats it as two steps: the dividend is paid, and the shareholder lends the money back (EMTA). The dividend goes on annex 7 and INF 1 for the month of the conversion. The later repayment of the loan is not taxed again. With a sole shareholder, the agreement must be in writing or recorded at once in a document he signs (Commercial Code § 177(2)).

A loan from a shareholder to the company is allowed; the ban runs only the other way (Commercial Code § 159). Interest paid to a resident individual carries 22 percent withholding (Income Tax Act § 4, § 17 and § 41). Interest paid by an ordinary OÜ to a non-resident, such as an e-resident who lives abroad, is not taxed in Estonia (Income Tax Act § 29(7)). Interest to a related party above the market rate can be taxed at company level, unless income tax was withheld on it, as it is for a resident individual (Income Tax Act § 50(4) and (5)). In practice this applies to above-market interest to a non-resident lender.

What happens if a dividend was paid unlawfully?

The shareholder must return it, the board members who caused it are jointly liable with him, and creditors can claim the return when the company cannot pay them. The tax paid on it stays paid.

A resolution that breaks the dividend rules (no approved report, too much profit, too few net assets) breaches a rule that protects creditors, so it is void (Commercial Code § 177.1). The consequences (Commercial Code § 158):

• Return. The shareholder returns what he was not entitled to. No set-off is allowed against this claim.
• Good faith. If the shareholder did not know and should not have known, the return can be claimed only when the creditors need it. A sole shareholder who is also the board member will rarely be in good faith.
• Creditors. A creditor who cannot be paid can claim the return to the company. In bankruptcy, only the trustee can.
• Limitation. Five years from the payment.
• Board. The board members who caused the payment are jointly liable for the return, and liable for the damage (Commercial Code § 158(6) and § 187).

Tax. The payment is still a profit distribution, taxed and declared in the month of payment (Income Tax Act § 50(1)). The Income Tax Act has no rule that refunds the tax when the dividend comes back (Income Tax Act § 54(6)).

Fixing a paperwork error. Confirmation by a new resolution cures only a resolution that could be challenged, not a void one (Commercial Code § 177.1 and § 178(2)). Once the report is approved, the shareholders can adopt a new, lawful resolution. But the money must really come back first, because the return claim cannot be set off against the new dividend. The new payment is taxed in its own month, so this route can cost the tax twice. Before you choose it, you can ask EMTA for a binding advance ruling on the planned steps (Taxation Act § 91.1).

When is the dividend declared on the TSD and the tax paid?

By the 10th of the month after the payment. The company files the TSD with annex 7 and form INF 1, and pays 22/78 of the net dividend to the Tax and Customs Board (EMTA). A company with no employees files a TSD only for the months in which it has something to declare, such as a dividend.

The tax period is the calendar month. The company files its return and pays the tax by the 10th of the next month (Income Tax Act § 3 and § 54). Form INF 1 lists the recipients and is due on the same day (Income Tax Act § 56; TSD regulation). The tax calendar shows the due dates.

How to fill it in (TSD regulation, annex 8; EMTA annex 7 guide):

• code 7008: the net dividend paid in the month from the company's own taxed profit;
• code 7217: the tax, 22/78, carried through code 7200 to TSD code 114;
• INF 1 part I: each recipient with the payout type DK, the personal or registry code, and the amount;
• a dividend paid out of tax-exempt dividends that a holding received goes on part II of annex 7 (codes 7310 and 7311) instead of code 7008; on INF 1, a payout from code 7311 to an individual has the payout type MDK.

The rate. The tax is 22 percent of the gross amount, which is 22/78 of the net dividend (Income Tax Act § 4). The lower 14/86 rate for regular dividends ended on 31.12.2024. See corporate income tax on distributions and Estonian tax rates.

Withholding. No tax is withheld from the dividend itself. The one exception is 7 percent on a dividend to an individual paid out of exempt dividends whose profit was taxed at 14/86 before 2025 (Income Tax Act § 61(68)). For a non-resident with a residence certificate, a lower treaty rate can apply (TSD regulation, annex 8). A resident individual does not include the dividend in his taxable income (Income Tax Act § 12(2)).

A sole shareholder with no employees. File a TSD only for a month with something to declare: a salary, a board fee, a fringe benefit, a payment with withholding, a hidden profit distribution, or a dividend (Income Tax Act § 41, § 50.2 and § 54). If the shareholder takes no board fee, the dividend month may be the only TSD of the year. Pay the tax to the company's prepayment account in e-MTA.

How do you correct a dividend declared wrongly on the TSD?

File a corrected TSD with annex 7 and INF 1 in e-MTA for the month concerned. If more tax is due, pay it with interest of 0.06 percent a day from the day after the original due date (Taxation Act § 115 and § 117).

A taxpayer who finds that a return understated the tax must tell EMTA without delay (Taxation Act § 89). The correction is a new TSD for the same period, marked "parandus" on code 120. A correction filed after the deadline gives its reason on code 121 (TSD regulation, annex 1). Correct annex 7 and INF 1 together, so their totals match.

Typical errors:

• Wrong month: the dividend went into the month of the resolution, not of the payment. Remove it and declare it in the month of payment.
• Gross and net mixed up: code 7008 is the net amount paid.
• Wrong code: an exempt dividend on 7008 instead of 7310, or the reverse.
• Missing or wrong recipient on INF 1.

Annex 7 carries some balances from month to month. If a correction changes one of them, you must correct every later month too, even months with no annex 7 (EMTA annex 7 guide).

Money already on the prepayment account on the due date covers the tax, so no interest runs on that part (Taxation Act § 105). EMTA can assess tax within three years from the due date, or five years if the tax was left unpaid on purpose (Taxation Act § 98).

Can shareholders waive a declared dividend?

Yes, before it is paid, but only with the consent of each shareholder whose claim ends. Nothing goes on annex 7, because nothing was paid. After the payment, the only way back is a return, which does not undo the tax.

A declared dividend is a claim of each shareholder against the company (Commercial Code § 157(4)). A claim ends by an agreement between the shareholder and the company (Law of Obligations Act § 186). So a majority resolution cannot take back a dividend that one shareholder has not agreed to give up. EMTA confirms that shareholders may waive a dividend with no payment, and then annex 7 is not filed (EMTA annex 7 guide; Income Tax Act § 50(1)).

Practical points:

• Put the waiver in writing, signed by the shareholder and the company. With a sole shareholder, it must be in writing or recorded at once in a document he signs (Commercial Code § 177(2)).
• In the books, reverse the payable to retained earnings, and reverse the income tax recognised at the declaration (Accounting Standards Board guidelines, annex 8, point 46).
• If the waiving shareholder is also a board member and the company has no supervisory board, the shareholders decide the transaction and name who represents the company. With several shareholders, the waiving shareholder does not vote (Commercial Code § 168 and § 177).
• A waiver by one shareholder ends only his own claim. The amount stays in the company and does not pass to the others.

General information, not advice for your situation. The law as in force on 30.09.2026.