Latvia’s property tax is unfriendliest in the Baltics

RIGA - Latvia’s property tax is unfriendliest among the Baltic states, BDO Latvija audit company concluded.

BDO Latvia partner and tax consultant Janis Zelmenis said that the company has studied property tax systems in all three Baltic states and concluded that the range of objects on which the tax is applied is the broadest in Latvia, and Latvia also has the highest tax rates.

The majority of Lithuanian residents are not paying property tax for their housing – the tax is applied only on expensive properties – over EUR 220,000 per family.

Meanwhile, in Estonia, the tax is not applied on buildings. Property tax is not paid for land plots of up to 1,500 square meters. The property tax rate in Estonia is among the lowest ones in the Baltics. The property tax is not applied on land that cannot be used for business purposes and on land with residential houses.

The study revealed that the share of property tax among all tax revenues in not large – 1.25 percent in Lithuania, 0.77 percent in Estonia, and 2.28 percent in Latvia. In 2016 property tax in Latvia was collected in the amount of EUR 220 million, and more than half of it was collected in Riga.

When purchasing an apartment, the duty to be paid to the state amounts to 2 percent of the sum in Riga, 0.5 percent in Tallinn, and 0.8 percent in Vilnius. If an apartment costs about EUR 100,000, one will have to pay EUR 2,000 for registering the apartment in Riga, EUR 1,300 in Tallinn and slightly above EUR 500 in Vilnius. Later, no property tax would be collected for such an apartment in Vilnius or Tallinn, while in Riga there will be the annual property tax payment of EUR 400 if the cadastral value does not change and the person has declared his place of residence in this apartment.

Zelmenis also noted that calculation of cadastral values in Latvia is unfair. "The cadastral value is calculated based on the property transactions in the neighborhood. If there is a hut next to a palace, and the palace has been sold three times for a higher and higher price, the hut’s cadastral value will grow along, even though its actual value has not improved," he said.