Proposed Rates for Real Estate Tax Announced

By , 23 Oct 2018, 13:00 PM Business

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STA, 23 October 2018 - The Finance Ministry has produced a blueprint for the new real estate tax, suggesting that a 0.1% tax rate for residential properties and 0.6% for other buildings. 

The proposal, published on the ministry's website on Tuesday, is based on an analysis of the current taxation and a simulation of tax rates.

The ministry proposes taking into consideration current effective tax rates, with the entire appraised value of the property serving as the taxable base.

Farmland and forests would be taxed at rates agreed with the stakeholders in 2013, that is 0.15% for farmland and 0.07% for woodland.

The ministry proposes that the new tax apply to all properties, with the exception of those belonging to international institutions.

All residential properties would take the same tax rate, regardless of whether they are holiday homes or rental properties, Finance Ministry State Secretary Mateja Vraničar Erman told TV Slovenija last night.

This would go against the commitment in the coalition agreement to introduce a real estate tax that would impose higher levy on larger and multi-property owners.

Apart from a simulation based on current effective rates, the ministry also conducted the analysis with rates of 0.2% and 0.26%.

"Given the effects of the varieties presented, the most suitable solution is taking into account the current levels of effective taxation and different rates for different types of properties," the ministry says in the blueprint.

The result would be that the taxation of real estate under the current system would on average not change substantially, while expanding the levy to all properties would secure somewhat higher revenue.

"How much higher would depend on what the final solutions will be (for example as to taxable properties or tax rates)," the ministry said.

The proposal is yet to be subject to political and technical consultations as well as the public consultation period.

The Finance Ministry is expected to present the blueprint to coalition members of the parliamentary Finance Committee on Friday.

The tax take would be revenue of municipalities in its entirety.

The goal is that on the whole, the tax would not be a greater burden than the current levy for the use of building land, property tax and forest road fee, all three of which the new tax would replace.

The ministry also wants to reduce the burden on businesses considering that legal persons currently pay about 70% and individuals about 30% of the levy for the use of building land.

Estimates issued by the ministry earlier this month indicate that municipalities will collect EUR 230m in levy for the use of building land this year.

The ministry expects coalition talks on the blueprint to run until 5 November, so it will produce a draft bill on real estate tax by 19 November, followed by a public consultation period until 18 January.

After renewed coalition talks, the bill would be put forward to the government in March and parliament could pass the bill in June or July.

The law would take effect on 1 January 2020, with the first assessments the same year.

Serving as the basis for the tax will be the value of the real estate determined through a mass appraisal system based on the real estate valuation bill passed last December.

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