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Property taxes (not to be confused with the real estate tax) are any taxes related to real estate, including, in their broader sense, state fee, stamp duties, as well as taxes on any profits gained from real property transactions. In Latvia, there are the following property taxes:
Real estate tax
Real estate tax (in Latvian: nekustamā īpašuma nodoklis) is a tax imposed on real property. Taxable objects comprise:
- buildings or their parts
- infrastructural objects
The law regulating the property tax is On the real estate tax (in Latvian: Par nekustamā īpašuma nodokli). According to it, municipal governments have the power to determine its rates for each specific case. In this, they are to apply a number of guiding principles, which do not allow to impose the tax at random. The real estate tax rate can range from 0.2% to 3% of the cadastral value of a property. In practice, however, the rate may be bigger than 1.5% only is special cases, which means that in the majority of cases the rate is from 0.2% to 1.5%. Additionally, there are two sets of rules, one of which applies to land, and the other - to buildings. For buildings, there is a number of tax brackets determined by the cadastral value.
Capital gains tax
Capital gains tax (in Latvian: Ienākuma nodoklis no kapitāla pieauguma) is a tax imposed on gains from selling a property. In Latvian property deals, it is also sometimes called the income tax, which arises from its Latvian name - Ienākuma nodoklis no kapitāla pieauguma - literally meaning income tax on capital growth. It has a rate of 15% of the gain. There is also a number of cases where the sum can be reduced, or the tax can be removed altogether.
Stamp duty and notary fees
Stamp duty and notary fees are two payments related not to the property itself, but to the procedure of buying one. A stamp duty is a tax paid when registering your newly-acquired property with a Land Book, and it amounts to 2% of the cadastral value of the property. It can be smaller (0.5%) or bigger (3%) in some cases, but these are not that common. Additionally, Land Books provide other services, for which stamp duties also must be paid. A notary fee is a fee paid to a notary for employing any of his/her services. Most notably, the fee is paid when preparing a real estate purchase agreement, but it also applies for any other documents you wish to notarize.
Tax and maintenance obligations
Anyone who deals in Latvian property has certain tax and maintenance obligations to perform. First and foremost, one must properly register and pay all the one-time taxes at the time of transaction. For example, property sellers need to pay capital gains tax, and buyer must register with a Land Book. The convenient thing is that you will probably not be able to seal the deal without doing all that, which means that any property agency will make sure everything has been done. After that, it all depends on your ownership status and your aims.
If you are any kind of real estate owner, i.e. you are registered as an owner in appropriate Land Books, it is also your obligation to pay the real estate tax.