Timor-Leste Capital Gains Tax Guide: No Separate CGT, 0% Rate 2026
Timor-Leste does not impose a separate capital gains tax. Capital gains are treated as ordinary income and taxed under the standard PIT (0-10% for individuals) or CIT (10% for companies). There is no preferential rate for long-term holdings and no special exemptions for particular asset classes beyond what ordinary income treatment provides. Here is how capital gains taxation works in 2026.
Capital gains taxation in Timor-Leste is governed by the Income Tax Act. Unlike many countries that have a separate capital gains tax regime with different rates and rules, Timor-Leste simply includes capital gains in the definition of taxable income. This means gains on the sale of assets — whether real estate, shares, business assets, or other property — are taxed at the same rates as other income. This simplified approach eliminates the complexity of CGT rate schedules, holding period distinctions, and categorization of assets. Property tax guide →
Real-world example: An individual buys a property in Dili for USD 100,000 and sells it 2 years later for USD 150,000. Gain: USD 50,000. This is added to the individual's other income. If total annual income is USD 35,000, PIT: 0% on USD 6,000 = USD 0, 10% on USD 29,000 = USD 2,900. A company selling the same property pays CIT at 10% on the gain = USD 5,000. Compare to Australia where CGT of up to 45% would apply (with 50% discount for holding >12 months). Corporate tax rates →
Capital Gains Treatment
- Individuals: Gains taxed at progressive PIT rates (0-10%) — added to other income
- Companies: Gains taxed at standard CIT rate (10%) as part of ordinary income
- Real estate: No separate CGT — gain is ordinary income, no time-based exemption
- Shares and securities: Gain taxed as ordinary income — no special 0% rate
- Cryptocurrency: Treated as ordinary income or business income depending on activity
- Business assets: Gain on disposal treated as ordinary business income
There is no distinction between short-term and long-term gains. All gains are taxed at the same rate regardless of holding period. Losses on asset sales may be offset against gains but cannot be deducted from other income.
Calculating the Gain
The taxable gain on asset disposal is calculated as:
- Sale proceeds: The amount received from the sale
- Minus cost basis: The original purchase price plus acquisition costs
- Minus improvements: Capital improvements made to the asset
- Minus selling costs: Agent commissions, legal fees, and other disposal costs
- Equals taxable gain: Subject to ordinary income tax rates
If the sale proceeds are less than the cost basis (a capital loss), no tax is due. Capital losses can only be offset against capital gains in the same tax year.
Exemptions and Reliefs
- Primary residence: Gains from the sale of a principal residence may be exempt if certain conditions are met
- Inheritance and gift: No tax on property received through inheritance or gift (no inheritance/gift tax)
- Small disposals: Gains below a de minimis threshold may not require reporting
Exemptions are limited compared to countries with full CGT regimes. The simplicity of the system means fewer reliefs but also lower overall rates.
Do non-residents pay tax on capital gains?
Yes. Non-residents selling Timor-Leste assets are subject to the same rules as residents. Gains are taxed at PIT or CIT rates depending on the entity type. The ANI requires declaration of gains on the sale of Timor-Leste real estate by non-residents.
How are capital gains reported and paid?
Capital gains are reported as part of the annual tax return. For real estate transactions, the buyer or notary may be required to report the transaction to the ANI and withhold applicable tax at source. For securities and other assets, the seller declares the gain in their annual return.