From July 1, sellers of agricultural land do not have to pay PIT when selling land to farmers

REMINDER!!!!  On July 1, a relief will come into effect, which stipulates that the seller of land will not have to pay Personal Income Tax (PIT) on income earned by farmers from the sale of agricultural land. Considering the approaching changes, we would like to draw your attention to the conditions for selling agricultural land.

From 1 July 2014 to 1 July 2016, the income of the seller of agricultural land will not be subject to Personal Income Tax if the land is purchased by the owner of a farm, a commercial company registered in the Enterprise Register, an individual merchant, a farm or a person performing economic activity registered with the State Revenue Service. The land buyer must have generated more than half of the income, but not less than 2,845.74 euros per year, from agricultural activities in at least one of the last three years, or must receive state or European Union support payments for agriculture and rural development as a young farmer.

When selling agricultural land to another buyer (not a farmer), the seller will still have to pay Personal Income Tax. It is calculated in the amount of 15% from the difference between the purchase value of the land and the price set by the seller. The only exception when the tax will not be paid is if the owner sells it cheaper than when he bought it.

Tax relief will be applied based on the date of conclusion of the contract (so, if you are planning to purchase land soon, it is worth inviting the land seller to conclude the contract after July 1). Before concluding the sales contract, the seller is obliged to pay real estate tax - 1.51 TP3T from the cadastral value of the land. When concluding the contract, you must also take into account the state fee in the amount of 21 TP3T. It is calculated from the sales amount specified in the contract or from the cadastral value - but always from the greater one.

The tax relief will also apply in cases where a slum is located on the property. In such a situation, it will be necessary to obtain a certificate from the building authority and submit it to the SRS to issue a certificate stating that the specific building is no longer suitable for living.

If you have any questions, please contact our agricultural policy expert Mārtiņš Trons, tel. 29805456 or martins.trons@zemniekusaeima.lv