real estate tax reform

Today, on July 29, the Ministry of Justice sent the Ministry of Finance, as well as other institutions involved in the harmonization process, the updated proposals for the real estate tax reform. The Ministry of Justice calls for the introduction of a non-taxable minimum of 100,000 euros per declared person, as well as a reduction of the tax on residential land five times from 1.5% to 0.3%.  

The updated proposals were after the conciliation meeting that took place at the Ministry of Justice on 21 July this year concerning the draft law “Amendments to the Law “On Real Estate Tax””.  The revised proposals provide for a non-taxable minimum of EUR 100 000 per person declared, with a reduction coefficient of 0.2 to be applied to the residual value, if any. For example, if the cadastral value of the dwelling is 80,000 euros and one person has declared their place of residence in it, no tax should be paid for the dwelling. If, for example, the value of the dwelling is 300,000 euros and two persons have declared their place of residence in it, then the tax would be calculated from 20,000 euros. This reduction coefficient would only apply to dwellings with the value of up to EUR 500,000. 

The proposals also provide for a reduction in the tax on all residential land from 1.5% to 0.3%. This reduction would apply to all residential land. 

According to the calculations of the Ministry of Justice, implementing these changes, the total revenue of local governments from the real estate tax in 2022 would be at least 232 mln. EUR. For comparison, in 2018, local governments actually collected 207 mln. euro (excluding debts of previous years). In the opinion of the Ministry of Justice, the above revenue forecast allows to consider halving the tax rate for businesses. 

J. Bordāns: "The right to housing is a fundamental right. We therefore call for the abolition of real estate tax on primary housing and halving of rates for businesses. Our calculations show that a solution can be found.”

On July 15 this year, the State Land Service submitted for public discussion the cadastral values designed for 2022, which have been recalculated in accordance with the value of real estate in the market in accordance with the task given by the government.  For these cadastral values to come into force in 2022, they must be approved by the Cabinet of Ministers. The Minister of Justice has previously stated that he will not submit this project to the government for approval until there are guarantees that the tax-free minimum for primary housing and reduced tax rates for businesses will be introduced.