State to tap real estate boom

  • 2005-09-21
  • Baltic News Service
RIGA - Despite a record-breaking budget surplus, the Finance Ministry intends to tap into so-called speculative transactions on the real estate market to further fill state coffers.
The ministry has prepared a series of amendments to the personal income tax law according to which individuals who sell their property more often than once every three years will have to pay taxes on capital gains. If the amendments are adopted, then property sellers will have to pay a personal income tax rate of 25 percent on the difference between the sales and purchase prices.

Currently personal income tax is not paid on such real estate transactions if the owner has held his property for at least a year.

"We all know that the amount of speculative transactions on the real estate market is considerable, and in a majority of cases those who carry out these transactions avoid paying personal income tax," the ministry said in a statement.

The amendments drawn up by the ministry must still be coordinated with other ministries and approved by the government and Parliament before going into effect, which is likely to occur next year.

Real estate specialists have varying opinions on the amendments.

Edgars Sins, director of Latio, a real estate company, said that he supported such a suggestion and that, in fact, it should have been done a long time ago. He described the real estate business as a "flourishing sector" where "one could operate without paying taxes."

Vadims Markovs, head of Nira Fonds, a real estate project developer, said that he did not support the amendments, explaining that it would not reduce the number of profiteers from real estate.