What does Capital Gains Tax (CGT) apply to?

Capital Gains Tax (CGT) specifically applies to the profit made from the sale of an owned asset. When an individual or a corporation sells an asset for more than its purchase price, the profit realized is considered a capital gain and is subject to taxation. This taxation occurs when assets such as property, stocks, or bonds are sold at a price higher than the original purchase price.

For example, if a person buys a piece of real estate for €200,000 and later sells it for €300,000, the €100,000 profit is subjected to CGT. The purpose of this tax is to levy a charge on the increase in value of the asset rather than on the income generated by it, distinguishing it from other types of taxes that are levied based on regular income or transactional sales.

In contrast, other options refer to different types of taxation: rental income is taxed under income tax or property income tax, dividends are taxed at different rates as income, and sales tax applies to consumer purchases of goods and services but not to the sale of capital assets. Understanding this distinction is crucial for recognizing how different types of taxes apply in a financial context.