A shareholder can put money into their own limited company in three ways: increasing share capital, making a contribution outside share capital, or providing a loan. Each has different legal, accounting and tax consequences. Slovakia and the Czech Republic share the same three tools but differ in the detail — from the minimum share capital and the legal basis of the contribution to how interest on a shareholder loan is capped.
What are the three ways to put money into the company?
When a company needs money from its owner, the three routes differ mainly in whether the funds become permanent capital or only temporary debt. A share-capital increase and a contribution outside share capital both strengthen equity — funds the company need not repay on a fixed date. A loan is the opposite: it is debt the company must repay and usually pay interest on.
This distinction has practical effects in both countries. Equity improves the company’s creditworthiness and adds no repayment burden, while a loan is fast and flexible but its interest is limited for tax purposes and it worsens the debt-to-equity ratio. If you would rather delegate the choice, our Slovak tax advisory can help you structure it.
How does increasing share capital work?
Here the two countries differ most in the entry threshold. In Slovakia the minimum share capital of an s.r.o. is 5,000 EUR, with at least 750 EUR per shareholder; in the Czech Republic it is just 1 CZK per shareholder since 2014. In both, an increase is decided by the general meeting and must be entered in the commercial register, which makes it the most formal and slowest of the three routes.
Because the increase takes effect only on registration, it also carries filing formalities and, in Slovakia, a court fee (66 EUR, halved for electronic filing). Share capital also cannot simply be paid back out; reducing it is again tied to the register and to creditor protection. That is why owners often prefer one of the other two routes when the money may need to return.
What is a contribution outside share capital?
A contribution outside share capital is the more flexible option and exists in both systems, though under different provisions. In Slovakia it rests on Section 121 of the Commercial Code, under which the articles of association may let the general meeting impose a contribution obligation up to half of the share capital. In the Czech Republic it is governed by Sections 162 to 166 of Act No. 90/2012 and can be either mandatory (by the general meeting) or voluntary (by written agreement with the managing director’s consent).
In both countries the contribution does not increase share capital but is recorded in account 413 – Other capital funds, and it is not entered in the commercial register. That makes it faster and cheaper than a capital increase, and because it is equity rather than debt, it does not worsen the debt-to-equity ratio.
How can the contribution be returned?
Unlike share capital, a contribution can be returned to the shareholder relatively easily in both jurisdictions. The general meeting decides on the payout, which is booked as a reduction of account 413. Returning one’s own contribution is not a share of profit, so it is treated differently from a dividend.
The limits are similar in spirit: the payout is possible only if enough equity remains and creditors are not endangered. Czech law is explicit — under Section 166 a voluntary contribution may be returned only to the extent it exceeds the company’s loss. This returnability is what makes the contribution a popular tool for bridging a temporary cash shortfall without burdening the company with interest.
How is a shareholder loan taxed?
A shareholder loan creates debt rather than capital, and in both countries the interest faces two tax limits. First, because the shareholder is a related (associated) party, the interest must be at arm’s length — the rate independent parties would agree. Second, a thin-capitalisation test applies, but the two countries measure it differently.
Slovakia caps deductible interest on related-party loans at 25% of an EBITDA indicator (pre-tax profit plus depreciation and interest) under Section 21a of Act No. 595/2003. The Czech Republic instead uses a debt-to-equity ratio under Section 25(1)(w) of Act No. 586/1992: interest on related-party loans is non-deductible to the extent the loans exceed four times equity (six times for banks and insurers). In both cases a stronger equity base — for instance through a contribution — improves the outcome. For sound accounting behind these decisions, see our note on professional accounting in Slovakia.
Which option should you choose?
The choice depends on whether the money is a permanent strengthening of the company or only temporary help. For a permanent injection that also improves the company’s external standing, share capital fits. For flexible reinforcement without a register entry and with the option of a later return, the contribution to account 413 is ideal. And for a temporary injection the company can service with interest, a loan may work — mindful of arm’s-length pricing and the thin-capitalisation test.
In practice the methods are combined: part as a contribution, part as a loan. What matters is deciding in advance and documenting it correctly, because reclassifying a contribution afterwards is complicated and can have tax consequences in both Slovakia and the Czech Republic.
Uncertainty about how to put money into your own company can cost you in tax and time. We are happy to help you choose and document the most suitable form of contribution for your s.r.o.
FAQ
Is a contribution outside share capital entered in the commercial register?
No. In both Slovakia (Section 121 of the Commercial Code) and the Czech Republic (Sections 162 to 166 of Act No. 90/2012) the contribution is booked in account 413 and does not increase share capital, so it is not registered. That makes it faster and cheaper than a share-capital increase, which does require registration.
Is interest on a shareholder loan tax deductible?
Only partly, and the two countries differ. The rate must first be at arm’s length. Slovakia then caps deductible interest on related-party loans at 25% of an EBITDA indicator (Section 21a), while the Czech Republic disallows interest on loans exceeding four times equity (Section 25(1)(w); six times for banks and insurers).
What is the minimum share capital of an s.r.o.?
It differs sharply. In Slovakia the minimum is 5,000 EUR, with at least 750 EUR per shareholder, and it cannot fall below that during the company’s life. In the Czech Republic it has been just 1 CZK per shareholder since 2014, although companies often set it higher for credibility.