Immovable property tax
Company formation and accounting in Latvia
Last updated: 2016-01-07
Immovable property tax is a compulsory payment to the budget of municipality for the possession or use of property.

Taxable objects.

With immovable property tax are taxed material things, located within territory of the Republic of Latvia, if the things can not be moved from one place to another without damaging. Objects of the tax are:
  • land (with some exceptions);
  • buildings (including buildings that are registered in the cadastral system, but not put into operation);
  • engineering buildings, which are used in the economic activities;
  • auxiliary buildings of apartment houses, if area of an auxiliary building exceeds 25 square meters.

The law provides quite a lot of exceptions, when the above mentioned objects are not taxed.
Some of the exceptions (not subject to taxation):
  • Engineering constructions, that are not used for economic activities if individuals are owners of the constructions.
  • Immovable property of religious institutions, if this property is not used in economic activities and not used for housing (homes and apartments for housing are subject to taxation).
  • According to a list, approved by the Cabinet of Ministers, - land, located in specially protected natural territories in which the law prohibits economic activities. Buildings and civil engineering buildings that are located in previously mentioned areas and are used for nature protection, also are not subject to taxation.
  • Real Estate - a cultural monument protected by the government. But a cultural monument is subject to taxation if it is used for housing or used for economic activities, or it is not supported/managed according to the requirements of the protection of cultural heritage
  • According to the procedure established by the Cabinet of Ministers, land, which is covered by renewed or cultivated forest stands, is not subject to taxation.
  • National sports bases and land for the maintenance of such bases.
  • Auxiliary buildings of apartment houses, if the auxiliary building area does not exceed 25 square meters, with the exception of garages (garages are taxed with immovable property tax). Municipality can adopt mandatory rules and determine that the mentioned auxiliary buildings (excluding garages) are not taxed.
  • Buildings and civil engineering structures that are only used for agricultural production.
  • Buildings or parts of buildings that are used for the needs of education, health and social assistance.
  • According to the criteria and the list approved by the Cabinet of Ministers, buildings and engineering buildings, which belong to associations and foundations, are not subject to taxation.

The taxable amount. The cadastral value.

Taxable amount is the cadastral value of the immovable property (the cadastral value on 1st January of the tax year).
The cadastral value is the cost (assessment) of land and buildings. The cost (assessment) is calculated according with criteria that are internationally recognized, uniform and approved by government. Calculating the cadastral value must take into account:
  • location of the immovable property,
  • registered data about condition of the immovable property (for example, technical quality),
  • type of use (for example, housing, household building, land),
  • area,
  • encumbrances and other criteria.

The formulas for calculating the cadastral value are created to get the cadastral value as close as possible to the market value. But until now, in practice, the cadastral value is significantly less than the market value.

Information about the cadastral value is available on the State Land Service.

Taxpayers.

Taxpayers are natural, legal persons and on the basis of an agreement created groups of such persons and their representatives if they own immovable property or are legal holders (possessors) or users (in some cases) of immovable property.

If persons are co-owners of a real estate, then each of the co-owners must pay a proportionate (corresponding) amount of tax regarding his share in the joint ownership.

Owner of a real estate is a person, whose property rights are recorded in the Land Register, or, before the restoration of legal force of the Land Register law, property rights are recorded in municipality or the State Land Service.

The legal holder (possessor) is:
  • A person, which, according to decision of certain authority (determined in legislation), during process of land reform, has received ownership of the land for remuneration or a person has regained ownership of the land and the land is measured (allocated) in nature (on the place).
  • A person that, according to legislation, has regained ownership on buildings and engineering buildings and the person has actually received buildings and engineering buildings.
  • A person that received real estate ownership based on inheritance or other rights.

Taxation period.

Immovable property tax taxation period is one calendar year. Municipality at beginning of a year (usually until 15th February) sends to each taxpayer a notification about amount of the tax for corresponding year.

Tax rate.


Municipality calculates the immovable property tax according to certain rate from the cadastral value, determined by the State Land Service.

Minimum rate is 0.2%. Maximum rate is 3% from the cadastral value of immovable property. According to legislation municipality determines exact rates.

Municipality determines rate, increasing 1.5% from cadastral value only if immovable property is not maintained (managed) according to legislation.

If municipality until 1st November of a year, preceding taxation year, has not published tax rates, then the tax must calculate according to following rates:
  • 1.5% from cadastral value for land, buildings or parts of buildings (excluding building for housing) and engineering buildings.
  • 0.2% for buildings for housing if the cadastral value does not increase 56 915 euro.
  • 0.4% for buildings for housing if the cadastral value increases 56 915 euro but does not increase 106 715 euro.
  • 0.6% for buildings for housing if the cadastral value increases 106 715 euro.

How to pay the tax?

Taxpayer may pay full tax amount in advance or 1/4 from full tax amount until 31st March, 15th May, 15th August and 15th November.

Tax is payable to budget of municipality, in whose territory the immovable property is located.

In case of purchase of immovable property a buyer (new owner) has obligation within a month after obtaining ownership to arrive (to address) to a municipality, whose territory the immovable property is located.

In case of sale of immovable property, the immovable property tax must be fully paid until the end of current taxation year. Otherwise it is not possible to register a change of property rights.

Privileges.

Some groups of taxpayers may be eligible for a discount (privileges).
For example, the politically repressed persons, the poor (persons with low income), businesses that operate in the territory of special economic zones and free ports.

Some of privileges, determined in legislation:
  • For the poor - 90% of the calculated amount.
  • If a taxpayer (or taxpayer together with a spouse) has 3 or more children under the age of 18 years and the taxpayer or the spouse and at least 3 of the children have declared their place of residence in the immovable property. In such case tax discount is 50% from total tax amount, but the discount can not increase 427 euro.
  • For politically repressed persons tax amount is decreased by 50% if the immovable property is not used for economic activities. The privilege in general applies to land and to immovable property, used for housing.



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