A tax that an entity pays on capital gains– that is, gains arising from selling an asset/ investment that has increased in value. The gain is taxable depending on the tax bracket imposed on an entity in accordance with its taxable income. Taxable capital gains are presumed to have been realized by an entity selling, exchanging or disposing of a capital asset. Non-inventory assets are subject to this type of tax due to the fact that inventory assets correspond to profit taxes (taxes on profits from core operations).

Capital gains tax is known for short as CGT.