The tax authority has the right to assess, when issuing a certificate of acquisition of agricultural and forest land, whether the land would be used sustainably and skillfully
The Circuit Court recently analysed, in decision No. 3-23-902/23, the decision of the Tax and Customs Board (TCB) to refuse to issue a certificate to a company whose aim was to acquire an immovable with over ten hectares of forest land. According to subsection 9 (3) of the Restrictions on Acquisition of Immovables Act (RAIA), before acquiring such property, a company must obtain a certificate from the TCB confirming that it has produced agricultural products or managed forests in Estonia for the last three years before making the transaction.
The tax authority refused to issue the certificate even though the company had met the legal requirement and earned revenue from agricultural product sales (a total of 205 euros) over three years. The tax authority stated that the company could not, however, demonstrate that it would be able to manage the forest land purposefully and sustainably after acquisition.
The Circuit Court explained that the purpose of the restriction established by law is to help create, maintain, and strengthen viable agricultural businesses in rural areas. When acquiring agricultural land, the objectives of the RAIA can primarily be achieved if the land will be used sustainably and skillfully from the outset. According to the court, the TCB is competent to assess whether issuing the certificate would ensure the fulfillment of the purpose arising from the law based on factual circumstances.
The company argued in its complaint to the Circuit Court that the TCB had previously issued certificates under the same conditions, and thus the decision violated the constitutional principle of equal treatment. The Circuit Court found that there was no unequal treatment, as the TCB had changed its previously too formal practice of issuing certificates to align it with the law's purpose, and the company could not expect the continuation of erroneous behavior. The Circuit Court dismissed the company's complaint.
Income tax exemption for gifts and donations to help Ukraine was extended
On 10 April, the Riigikogu adopted the Act on Amendments to the Income Tax Act, extending the possibility of making tax-free donations and gifts aimed at maintaining Ukraine's territorial integrity and sovereignty, and providing and organising targeted humanitarian aid.
No income tax is payable on donations and gifts made from 24 February, 2022, to 31 December, 2025, to the following legal entities:
- MTÜ Eesti Pagulasabi / Estonian Refugee Council;
- MTÜ Mondo / NGO Mondo;
- Ukraina Kultuurikeskus / Ukrainian Cultural Centre;
- Riigikaitse Edendamise Sihtasutus / National Defence Promotion Foundation;
- Eesti Punane Rist / Estonian Red Cross;
- Rescue Union / Rescue Association;
- Rotary Klubi Tallinn Vanalinn / Rotary Club of the Old Town of Tallinn.
The income tax exemption was applied retroactively from 1 January, 2024.
Amendments to the Land Tax Act
On 19 June, the Riigikogu adopted the Act on Amendments to the Land Tax Act, giving local governments (LGs) more opportunities to decide on the amount of land tax. The following amendments to the Land Tax Act will take effect:
- From 2025, the maximum tax rate for residential land and agricultural land will be increased from 0.5% to 1.0% of the taxable value of the land;
- From 2025, the maximum tax rate for other land (land that is neither residential nor agricultural) will be increased from 1.0% to 2.0% of the taxable value of the land;
- In 2025, the uniform national limit on the annual increase in land tax will be 50% or 20 euros if the 50% increase in the land tax amount is less than 20 euros;
- From 2026, local governments will be able to decide the percentage of the annual increase in land tax (ranging from 10% to 100%);
- From 2026, each local government will set the amount of the land tax exemption for residential land in euros, and the national area-based land tax exemption will be abolished. For example, the land tax exemption for home owners in Tallinn, where residential land up to 1,500 m² is exempt from land tax, will be abolished. The new system will set the exemption amount in the range of 5 to 1,000 euros;
- The amount of the first land tax payment (the law allows land tax to be paid in two parts) will increase from 64 euros to 100 euros;
- A new latest date (1 October instead of 1 July) will be set for local governments to establish land tax rates, the percentage limit for the annual increase in land tax, and the amount of the residential land tax exemption;
- The basis for land tax exemption for land with a public building designation owned by the state will be clarified.
Different provisions of the law will come into force at different times: 1 July 2024; 1 January 2025; 1 March, 2025; and 1 January, 2026