Share capital is the contribution of shareholders to the company upon its formation. The law stipulates a minimum amount, which depends on the legal form. However, there is no upper limit. The amount of share capital may be changed during the company's operation. A company's capital increase may be made either from shareholders' funds or from the company's own funds.
It's important to remember that share capital increases are subject to tax on civil law transactions. The tax base is the amount of the capital increase. The company is required to pay 0.5% tax on this amount. An exception is made for contributions in kind in the form of a company's business enterprise or its organized part, shares in another company that provide a majority of votes, or further shares in the form of shares if the company to which these shares are contributed already holds a majority of votes. Such contributions are not subject to tax on civil law transactions.
In addition to the obligation to pay civil law transaction tax, which is a liability for the partnership, in certain cases partners also have an obligation to pay tax. This applies primarily to:
– making a contribution in kind to the company,
– increase in the share capital by increasing the nominal value of existing shares financed from the company’s own funds.
In the first case, the person making the contribution recognizes income in the amount of the contribution. At the same time, they will also recognize a cost of earning income in the amount of the purchase price of the contribution. An exception is the in-kind contribution of a business or an organized part thereof, which does not generate income. It should also be noted that in the case of an in-kind contribution by an entrepreneur, a VAT liability may arise. An in-kind contribution constitutes a supply of goods and may therefore be subject to taxation.
In the second case, the value of the shares held by the partners will increase without incurring any costs. Therefore, they will earn income without incurring any costs. The amount of the increase in the value of the shares will therefore constitute income subject to 19% tax.
An interesting tax ruling was recently issued on this matter. It was requested by the company's shareholders, who had contributed an enterprise in-kind. A portion of the enterprise's value was allocated to the company's reserve capital. The company then decided to increase its share capital from the reserve capital. The shareholders believed that this would not result in a tax liability, as the company had not earned the funds it transferred from the reserve capital to the share capital. If the initial contribution had been made entirely to the share capital, there would have been no income tax payable – the company's share capital contribution is not subject to taxation.
However, the Director of the National Tax Information Service disagreed with this position. He stated that it was irrelevant where the company obtained the funds for the share capital increase; what mattered was only that the capital was increased from company funds. Therefore, the shareholders were obligated to pay the tax. (Interpretation of July 23, 2025, reference number 0113-KDIPT2-3.4011.567.2025.1.NM).
When deciding to increase share capital, it's worth considering the most effective way to do so. This is especially true since the funds in the reserve capital can be used in other ways (see Hypothetical interest = lower CIT ).
This article is for informational purposes only and does not constitute legal advice.
The law is current as of October 6, 2025.
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