NordenBladet —
The Riigikogu passed an Act on conducting the mass valuation of land in 2022.
The amendments introduced with the Act on Amendments to the Land Valuation Act, the Land Tax Act and Other Acts (406 SE), initiated by the Government, update the criteria for calculating the value of land and bring the land tax into conformity with the principles of the market value of land. The amendments do not concern the current tax exemption on the land under homes.
The Act makes changes to the principles of mass valuation of land. In the future, the Land Board will carry out mass valuation mainly on the basis of the data contained in national databases. In the future, the value zones that are used by local governments to calculate the value of each particular plot of land will no longer be determined upon mass valuation of land. Instead, the taxable value of each plot of land will be determined as a result of valuation.
The last mass valuation of land in Estonia took place in 2001, and in nearly 20 years, the value of land has increased by seven times on the average. The taxable value obtained as a result of mass valuation of land will be the basis for determining land tax, payments for tolerating utility networks and use fee under different usufruct contracts.
According to the Act, the next mass valuation of land will take place in 2022, and after that, valuations will be carried out every four years. The results of the mass valuation of land will be implemented from 2024.
The Act will reduce the maximum land tax rates that local governments can impose. For example, the maximum tax rate will be 0.5 per cent of the taxable value of the land instead of the current 2.5 per cent on residential land and forest land, and 1 per cent on commercial land. The lowering of the maximum tax rates will prevent land tax from becoming too high. In order to ensure a smooth transition to the new price level for the taxpayer, a 10 per cent limit will be imposed on the annual increase in the land tax amount.
The tax exemption on the land under homes will be fully extended on the lands where one of the intended purposes is residential land. For example, if there are business premises on the ground floor of an apartment building and the intended purpose of the plot of land is therefore partly commercial land, the apartment owners residing in the same building cannot enjoy tax exemption to the full extent.
The Act will also provide that, in the future, changes to land tax rates will have to be established at least six months before the beginning of the taxation year. At present, land tax rates are established by 1 February of the taxation year.
As the value of land has increased after the last mass valuation, the payments for tolerating utility networks will also increase by 3.5 to 4 times on the average once the new taxable values of land will be implemented. The payment for tolerating will change gradually during three years, in 2024–2026, each year by one third of the difference between the new and the present payment for tolerating.
One of the amendments provided by the Act concerns the methodology of mass valuation of land. In addition, the provision concerning the entry into force of the Act will be amended, according to which the Act will enter into force on 15 March.
72 members of the Riigikogu voted in favour (9 against) of passing the Act.
Source: Parliament of Estonia