Land Board starts preparations for land tax hike

Houses in Tallinn
Houses in Tallinn Source: Siim Lõvi /ERR

The Ministry of the Environment has sent out for approval a bill for regular land valuation that it is aiming to carry out in 2022 for the first time in 20 years. Regular valuations would take place every four years after that, while a ceiling would be introduced to stop land tax growing too quickly.

The last time regular land valuation was carried out in Estonia was in 2001, while the value of land has grown on average seven times since then. Previous valuations took place in 1993 and 1996.

The Land Board will hold the next regular land valuation in 2022 based on a draft resolution from the ministry, with valuations taking place every four years after that.

The price of land has changed at different speeds in different places, with owners of cheaper plots paying more land tax and those of more expensive land not enough.

The new bill will also introduce other changes. If before, homeowners living on land of mixed intended use had to pay land tax for the part of land intended for business use, they will also be exempt from having to pay land tax on land under dwelling in the new law. The change concerns people whose apartment buildings have business premises on the ground floors and living quarters above them.

Ceiling to be introduced for annual land tax hike

The main fear associated with regular land valuation is that land tax could be hiked by several times for some plots.

To counter this, the bill prescribes a maximum rate according to which land tax cannot grow by more than 10 percent a year.

Fees in contracts of use tied to taxable value of land will be leveled so that the annual fee comes to 3 percent of the taxable value of land. Because taxable values will be restored to the market level after the valuation, recent high tax rates will no longer be justified.

Regular valuations are set to take place every four years after 2022 as it would not be sensible to do it more often and the effects of individual land deals on results would be disproportionate. A fixed period allows for better planning of regular land valuations.

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Editor: Marcus Turovski

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