Transfer of immovable property

When selling or exchanging land, house or apartment, the question arises – whether income tax is payable on the gains received. If so, how and when to declare the gains and how the tax amount is calculated. You can find answers to these questions in the following guide.

Handbook

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Transferring a visitor’s apartment located in business premises with visitors’ apartments and on commercial land

Visitor’s apartment means an accommodation establishment that is rented out entirely (subsection 8 of § 18 of the Tourism Act).

A visitor’s apartment/holiday apartment is used for commercial purposes and therefore it is not exempt from income tax. The Law of Obligations Act distinguishes dwellings from business premises and practically rules out the possibility to use dwellings as business premises, and vice versa. Within the meaning of the Law of Obligations Act, a dwelling is a residential building or apartment that is used for permanent habitation. Business premises are premises used in economic or professional activities (§ 272 of the Law of Obligations Act).

The Supreme Court has agreed in its judgement that it is reasonable to assume that a building will be used for the purposes specified in the detailed spatial plan or building permit. At the same time, it is important to know that the classification of purpose for use of construction works which distinguishes residential buildings from non-residential buildings in construction law differs from the classification between dwellings and business premises within the meaning of subsection 1 of § 272 of the Law of Obligations Act. Thus, the legislative or regulatory provisions of construction law do not forbid the usage of residential building or an apartment that is located in a residential building for temporary residence. Likewise, an apartment that is located in a residential building may be used for providing accommodation services, i.e. in economic activity (RKHK 3-3-1-47-15, in Estonian).

Unlike ordinary apartments that are meant for use as places of residence, the purpose for use of holiday apartments is business activity. If a taxpayer has really been using a holiday apartment as his or her place of residence until its transfer and it is proven, the application for tax exemption to the sale of such an apartment may be justified in exceptional cases.

Last updated: 22.08.2022

Tax-exempt or taxable transaction

This table provides a quick overview of real estate transactions that are exempt from tax when certain conditions are met. For more information about the transaction you are interested in, please view the handbook.

Object of the contract of purchase and sale
Basis of tax exemption 
in the income tax act
To the subject of ownership reform /
a privatiser with the right of pre-emption /
the owneR
To a successor
To a legatee
By gift or other transfer transaction
Property returned in the course of the ownership reform § 15 (4) 5) sale is exempt from tax the tax exemption is passed on the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed
Immovable property obtained by restitution after being unlawfully expropriated and the essential part of which is a dwelling § 15 (5) 2) sale is exempt from tax


the tax exemption is passed on 

the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed
Immovable property privatised with the right of pre-emption and the essential part of which is a dwelling

§ 15 (5) 3)

The dwelling together with land belonging to it has been privatised with the right of pre-emption and the size of the registered immovable property does not exceed 2 hectares.

sale is exempt from tax the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed

Summer cottage or garden house

§ 15 (5) 4)

According to the register of construction works or the land register, the summer cottage or garden house has been in the person’s ownership for more than two years and the size of the registered immovable does not exceed 0.25 hectares.

sale is exempt from tax the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, if conditions are met, then sale is exempt from tax the tax exemption is not passed on, if conditions are met, then sale is exempt from tax

Last updated: 24.08.2022

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