Real Estate Tax Reform: Lower Taxation for High-Value Properties, Lower Budget Revenues
The Lithuanian Real Estate Development Association (LNTPA) draws attention to the fact that the real estate (RE) tax amendments currently under discussion in the Seimas do not bring greater clarity or systemic logic. The latest draft proposes to exempt the primary residence from taxation entirely and apply the tax only to property value exceeding €450,000 (or €900,000 for couples). In practice, this would mean that even high-end homes would often be untaxed.
According to LNTPA, this is not a project for a universal RE tax—something that has been repeatedly recognized as necessary at the national level—but rather a selective proposal focusing on taxing luxury or secondary properties. LNTPA President Mindaugas Statulevičius highlights that this approach fundamentally distorts the purpose of the RE tax:
“Real estate tax should be understood as an infrastructure tax—funds that return to the environment where a person lives: roads, sidewalks, bike paths, lighting, and so on.
Our association’s consistent position is to apply a small, symbolic tax to all properties. In that case, all residents have a legitimate expectation to demand investment in their living environment,” says M. Statulevičius.
LNTPA also emphasizes that the newly proposed RE tax not only distorts the logic of the tax but is also financially inefficient. Preliminary estimates suggest that the state budget may collect even less revenue than under the current system—failing to meet both defense funding and infrastructure development goals.
Even more uncertainty is created by the arbitrarily set thresholds—€450,000 for primary residences or €50,000 for secondary properties.
“We do not know whether these thresholds reflect the realities of the Lithuanian market. There is a lack of transparent studies, clear criteria, and solid analysis,” notes the LNTPA president.
LNTPA urges a return to the core purpose of real estate tax reform: to create a fair, clear, and proportionate system that promotes the development of communities and urban environments—instead of fueling mistrust and opacity.
LNTPA continues to stand by its consistent position and proposes the implementation of a unified and transparent real estate tax, eliminating the current numerous and ineffective exemptions. Key proposed principles:
• Merge land and real estate taxes into one coherent tax;
• Apply a 0.3–1% tax rate, to be set by municipal councils according to local context;
• Determine taxable value objectively, using comparative market value or income-based valuation methods;
• Eliminate all exemptions, except those required by international law (e.g. embassies, religious buildings);
• Provide a limited exemption for the first residence, up to a certain value, on the basis of social fairness;
• Allocate all collected tax revenues to municipal budgets, ensuring they are used to enhance the value of real estate—through social, engineering, educational, or other types of infrastructure;
• Tax state-owned property, thereby encouraging more efficient management of public assets.
Translated by ChatGPT