Analytics, Latvia, Real Estate, Taxation

At the end of March, LANIDA in partnership with DNB Bank organized an annual conference on the Latvian real estate market’s development. During the conference, the realtors’ association conducted the survey to find out entrepreneurs’ opinion about property taxation in Latvia.

The survey revealed that 43% of market participants believe that the property tax on one’s only home should be lifted. Also, 23% believe that the property tax rate should be reduced and 20% would support a progressive tax rate that would ensure higher taxes on more expensive properties. 8% of respondents said that the property tax should be lifted on housing but that it should be charged on land and commercial property, and 2% called for the abolition of taxes on all kinds of property.

Lawyer Ingrida Misina noted that all 100% of property tax revenues go to municipal budgets and that local authorities have broad opportunities not only to apply different tax rates but also to grant tax allowances. In her words, the local authorities’ tax policies can be very different, with tax allowances on property ranging from 25% to 90%. At present, properties’ cadastral values remain frozen while the government works out a new tax strategy.

As reported, the Latvian Cabinet of Ministers on April 11 rejected the proposal to lift the property tax on residential property if it is the person's only home, and instead suggested reducing the impact of the property's cadastral value on the calculation of the applicable property tax. The Cabinet listened to the Finance Ministry's report about the proposal to make one's only home exempt from property tax in which the ministry said that the move would not be economically substantiated. Instead, the problem of excessively high property taxes should be addressed by revising the cadastral value base.

The Finance Ministry approves of the Justice Ministry proposal to set a 10% cap on increase of the cadastral value base, to reduce cadastral value of residential properties to make it consistent with the market value and not to allow any exemptions for premium properties. In the long-term, an agreement should be reached on the cadastral value base for 2020-2023.