Draft Amendments to the Law on Property Tax

The Ministry of Finance has published a draft version of The Law on Amendments to The Law on Property Taxes. The most important amendment is related to the abolition of the fair value of real estate which is used as a basis for calculation of property tax. This will have a significant effect on the tax liability of all taxpayers who have recorded their real estate using the fair value method in their business records.

In June of this year, the Ministry of Finance publishes a working version of the Law in Amendments to The Law on Property Taxes.

The proposed amendments introduce novelties such as;

  • Excluding the possibility for taxpayers (who record real estate in their business records using the fair value method in accordance with IFRS) to determine the property tax for real estate in question using the tax base which is equal to the fair value of the real estate stated in the taxpayer’s business records.
  • The value of this real estate will be determined by applying the price per square meter which is prescribed by the local self-government.

Therefore, these proposed amendments will have a important impact on the tax liability of all taxpayers who record real estate in their business records using the fair value method.

Additionally, the other important amendment to the Law on Property Taxes also include the following:

  • Trails, asphalted and concrete areas, as well as open parking spaces, fences, playgrounds and other intergral parts of land will be considered as areas of taxable land.
  • Networks which are incorporated within facilities and the loaction of the connection to such networks will also be considered as areas of taxable land.
  • There will be a possibility of reducing the value of property tax base in the amount of depreciation at the rate which will be determined the local self-government for both for taxpayers who keep business records and taxpayers who do not keep business records.
  • The tax base of properties which are classified as properties for which the property tax base is determined on the basis of values stated in the taxpayer’s business records, will be determined as he sum value of the percentage share of that part of the property which has a useful area. The value of the remaining part of the the property will be determined in accordance with the provisions of the Law.
  • Individual/legal entities which acquire or alienate their rights to immovable property will have to so on the basis of a contract which has to be notarised and certified by the public notary.

These amendments will be applicable for the purpose of calculating property tax in 2019.

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