In Estonia, capital gains typically arise from the disposal of various assets, including but not limited to:
- Real estate properties
- Stocks and securities
- Bonds
- Mutual fund units
There is generally no distinction between short-term and long-term capital gains in Estonia. All capital gains are treated similarly for tax purposes.
Taxable capital gains are calculated by subtracting the acquisition cost of the asset from the selling price.
The formula is as follows:
Taxable Capital Gains = Selling Price - Acquisition Cost
Certain expenses related to the acquisition or sale of the asset may be deductible when calculating capital gains, such as:
- Brokerage fees
- Legal fees
- Transfer taxes
- Costs of improvements made to the asset (if applicable)
In Estonia, capital gains are subject to the same flat rate as corporate income tax, which is 20% on distributed profits.
The taxation of capital gains in Estonia is governed by the Income Tax Act (ITA), Section 16 & 47 (for corporations).
The Estonian tax system aims to maintain simplicity and efficiency by applying a flat rate to corporate income tax, including capital gains. This approach provides certainty to taxpayers and promotes investment by offering a competitive tax environment.
