Land Tax Amount May Increase by Up to 50 Percent Next Year

The Riigikogu has passed an amendment to the Land Tax Act, which allows the land tax amount to increase by up to 50 percent next year and up to 100 percent starting from 2026. Additionally, from next year, the maximum land tax rate for commercial and industrial land will rise from the current one percent to two percent.

The current Land Tax Act stipulates that regardless of the calculated land tax based on the new taxable value of the land and the tax rate, the annual increase in land tax cannot exceed 10 percent. This limit was only introduced at the beginning of 2024 to provide a protective mechanism against sudden jumps in land tax due to the regular revaluation of land in 2022.

According to the Chamber of Commerce and Industry (ECCI), the need for a 10-percent cap has not disappeared and should remain in effect. However, neither the ministry nor the Riigikogu considered the Chamber's proposal. The amendment adopted by the Riigikogu allows the land tax amount to increase by up to 50 percent next year compared to the previous year. From 2026, local governments will be able to set the maximum annual increase in land tax by regulation, but it must remain within the range of 10-100 percent.

The amendment to the Land Tax Act also raises the maximum land tax rate for commercial and industrial land from one percent to two percent starting in 2025. The Chamber opposed this change, as combined with the increase in the annual 10-percent cap on land tax, it could result in an unreasonable increase in land tax for some businesses.

The main goal of the amendments to the Land Tax Act is to increase the decision-making power of local governments in determining land tax rates.