Gross vs Net Yield & Estonia Real Estate Investment Tax in 2026
Gross yield is annual rent divided by the purchase price and ignores vacancy, maintenance fund payments and insurance. Net yield includes the owner’s actual costs and gives a realistic picture of the investment’s profitability. 2026 Tax Rules: Private individuals renting out long-term residential apartments receive an automatic 20% deduction (§ 39¹) and pay 22% on the remaining 80% (an effective tax rate of 17.6%), while capital gains on non-residence sales are taxed at 22%. Investing via an Estonian company (OÜ) allows deducting all expenses and loan interest with 0% tax on retained rental cash flow and capital gains.
What is a good rental yield in Tallinn?
On Tallinn’s apartment market a gross yield of 5.0–6.5% is considered good in the large residential districts (Lasnamäe, Mustamäe), and 4.0–5.0% in new apartments in the city centre and Põhja-Tallinn.
How is the net yield of a rental apartment calculated?
Net yield = (annual rental income − fixed costs and vacancy) ÷ total purchase price and renovation cost × 100%.
How are rental income and capital gains taxed on Estonia real estate investments in 2026?
For private individuals renting out residential property under a long-term lease, the statutory income tax rate is 22%, but 20% of gross rent is automatically deducted tax-free without receipts (Income Tax Act § 39¹), giving an effective tax rate of 17.6%. Short-term stays (Airbnb/Booking) and commercial properties are taxed at the full 22%. Capital gains on selling investment property are taxed at 22% for individuals, whereas investing via an Estonian company (OÜ) offers 0% corporate tax on retained rental income and capital gains until dividends are distributed (22/78).