Land tax

What it means

Land tax is the part of real estate tax paid on arable land, gardens, forests, permanent grassland, building plots and other land in the municipality. Together with building tax and the tax on flats, it is one of the local taxes.

The tax base is the plot's area multiplied by the land value per square metre. For farmland and forests the value is set in an annex to the law by cadastral area, while for building plots and other land it depends on the size of the municipality unless the municipality sets its own value.

The municipality sets the rate in a generally binding regulation and may vary it by type of land or part of the municipality. A plot of the same size can therefore be taxed quite differently in neighbouring municipalities, so it is worth checking the regulation before buying.

How it works in practice

The taxpayer is usually the owner recorded in the land register. For farmland leased for more than five years with the lease recorded in the register, the tenant is the taxpayer, and for state-managed land it is the managing body.

The real estate tax return is filed by 31 January of the year following the year in which ownership began. Tax liability arises from 1 January of that following year, after which the municipality sends a decision stating the amount and the due date.

For a company, land tax is a deductible expense if the land is used for business. Take care when the type of land changes, for example when arable land becomes a building plot: the change must be reported and the tax usually rises considerably.

What to watch out for

Changes affecting the tax are reported in a partial return by the end of January. Someone who sells a plot without reporting it is not automatically removed from the taxpayer list and may receive a decision even for a year when they no longer owned the land.

A municipality may grant exemptions or reductions in its regulation, for example for cemetery land, protected areas or plots owned by pensioners. A reduction usually has to be claimed in the return, however, or the municipality will not apply it on its own.