Taxation of immovable property in 2021. Overview

Immovable property and its taxation always trigger various discussions. What tax novelties will be introduced in 2021 in Lithuania?

The State Tax Inspectorate under the Ministry of Finance, STI (Valstybinė mokesčių inspekcija), in its information notice of 14 January 2021 “On the establishment of taxable values of immovable property subject to mass evaluation” (here) noted that the tax on immovable property (IP) for 2021 will have to be calculated based on the new taxable values. It was established by the state enterprise Centre of Registers. The STI has also commented on the tax-exempt amount of IP applied to natural persons. The STI stated that married natural persons who acquired, built, or are acquiring IP during their marriage would be able to use a larger tax-exempt amount of IP jointly only if the ownership right to such IP has been registered as common joint ownership with the Register of Immovable Property. If the common joint ownership is not registered with the Register of Immovable Property, the STI will presume that the IP is owned only by one of the spouses and will calculate the tax only to that one natural person. I.e., the value of the IP will not be divided for the spouses into equal shares.

Meanwhile, the provisions of the Civil Code (the CC) stipulate otherwise. Paragraph 1 of Article 3.87 of the CC establishes that under the legal regime, the property acquired by the spouses after the commencement of their marriage shall be their common joint ownership. Furthermore, paragraph 2 of Article 3.88 of the CC presumes that property is the common joint ownership of the spouses unless it is established that it is the individual property of one of them.

Consequently, we have the STI’s presumption on recognizing the ownership right only to one of the spouses, which does not comply with the legal regime of the spouses’ property under the CC.

A possibility to register a legal fact of the common joint ownership of the spouses exists, undoubtedly. It can be done electronically, however, it is a paid service and this possibility can be used by persons who have e-signature. Persons who do not have the opportunity to sign electronically would need to go directly to the state enterprise Centre of Registers.

Registration of the legal fact on the spouses’ common joint ownership would certainly facilitate the administration of the IP tax for the STI because it would become easier to identify the tax-exempt amount of IP applicable to the particular person. Nevertheless, failure to register the indicated legal fact may not be a sufficient basis for not applying the division of the value of IP immediately for the taxpayers (spouses) in equal shares as provided under the Law on Immovable Property Tax.