Restrictions still not introduced on selling land to foreigners

Field in springtime. Source: Hanna Karoline Taaramäe/

The Ministry of Rural Affairs is exploring opportunities for directing sales transactions of land and forest to local business-owners, but other ministries do not support the introduction of restrictions. These discussions did, however, unearth a bureaucratic hitch dating back 17 years with which hundreds of business-owners a year easily lie about being farmers or foresters.

Last spring, the coalition Center Party, Conservative People's Party of Estonia (EKRE) and Isamaa agreed to seek opportunities for regulating the sale of land and forest in Estonia, promising to give preference to local producers in the sale or leasing of fields and forest. Minister of Rural Affairs Arvo Aller (EKRE) has now taken the bull by the horns and is asking various institutions and organizations for ideas regarding how to change the rules.

Minister of Public Administration Jaak Aab (Center) stressed the EU's fundamental freedoms first and foremost, noting that the state cannot generally give preference to local residents or business-owners.

"Giving preference to a specific business-owner may damage the functioning of competition on the common market," Aab said, urging Aller to definiely see to it that the Ministry of Rural Affairs remains within the confines of state aid rules.

Minister of Justice Raivo Aeg (Isamaa) likewise urged the minister to think carefully before doing anything, stressing, among other things, that Aller must bear in mind the principle of equal treatment as outlined in the Constitution of Estonia.

"It must be taken into consideration that any restrictions on acquisition of property infringe upon the ownership rights not just of the acquirer but also of the property's transferor," Aeg wrote. He also noted that if the state were to start restricting possible buyers, sellers may not end up earning as much money selling their land as expected.

Minister of Foreign Trade and IT Kaimar Karu gave Aller some more specific tips as well. Karu believes that the Ministry of Rural Affairs should analyze how the state could give preference in the sale or leasing of land to those who already own some property in the vicinity. Karu likewise proposed how it could be possible to direct land transactions not via restrictions,but benefits. For example, if a piece of land is purchased by a business-owner that operates in a specific sector and region or generates an agreed-upon number of jobs, they could receive a tax benefit.

The foreign trade minister also said, however, that support cannot be distributed based on where the owner of a business is from. "Following the restoration of Estonia's independence, foreign investors have played an instrumental role in the development of Estonian industry and various regions," he wrote.

Tax authority has other concerns

The Tax and Customs Board (MTA) likewise weighed in on the matter. Their chief concern was not so much local vs. foreign producers, but rather an issue that could be resolved with a legislative amendment.

Namely, field and forest properties over ten hectares in size may only be purchased by businesses that are actually involved with agriculture or forestry, proof of which must be obtained from the MTA. MTA Legal Department director Tanel Ruusmaa admitted, however, that while the agency has issued such permits for 17 years already, how exactly businesses should prove their field of activity has not been legally defined.

"Last year we issued approximately 700 certificates altogether," Ruusmaa said. "And in the case of some one third of these, we suspected that the company hasn't actually been involved in the production of agricultural products or forestry in recent years."

Thus a company can officially be deemed an agricultural business if they can prove they sold 100 grams of strawberries last year, or a gravel producer with an annual turnover of €8 million be deemed an agricultural business if they submit €500 in bills for pumpkin sales. With minimal effort, anyone interested can conjure up the necessary documentation, and the MTA must issue a certificate.

"We have proposed that the MTA should not issue these certificates," Ruusmaa said. "Or another solution we see would be to provide specific thresholds in the law regarding how large a percentage of an individual's turnover should stem from the production of agricultural products or forestry."

While no one has yet begun setting limitations on the sale of agricultural and forested properties, it turns out that one amendment could resolve an ongoing problem that has lasted for 17 years already.


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Editor: Aili Vahtla

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