Smart tax planning when selling property in Latvia can save thousands of euros
Lawyers explain that by timing a property sale correctly, sellers can legally avoid the capital gains tax and save a significant sum. The key condition involves how long the property was owned and whether it was a declared residence.
When selling real estate that does not qualify for a tax exemption, sellers in Latvia must pay personal income tax on capital gains at a rate of 25.5%. This tax is calculated on the profit — the difference between the sale price and the acquisition value, including documented investments made in the property. This is explained by experts at a law firm founded by sworn advocate Lauris Klagišs.
However, the law provides exceptions that allow income from a property sale to go untaxed entirely. One such exception applies when a person has owned the property for more than 60 months and had their declared residence registered there for at least 12 consecutive months within that period, up until the sale agreement is signed.
How the exemption works in practice
If an owner has held a property for more than five years but has not declared residence there, it may be worthwhile before selling to register a declared residence at the address and wait out the required period so the conditions for the tax exemption are met.
Experts give an example: if the profit from selling a property is 40,000 euros, selling it immediately would require paying 10,200 euros in tax. If the transaction instead meets the legal exemption criteria, the tax owed could be zero.
Specialists stress that this is not about tax evasion but about legally using the rights granted under the law to make more financially favorable decisions. Sometimes waiting a year and planning carefully can significantly increase the amount that remains with the seller after the sale.
At the same time, it is noted that each situation must be assessed individually, since the tax treatment depends on the specific property's acquisition date, the owner's history of declared residence, and other circumstances.
