Lithuanian Homeowners Skirt Tax Laws, Sparking Equity Concerns
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A growing number of homeowners in lithuania are choosing not too declare completed construction on their properties, leading to accusations of unfairness and questions about enforcement of real estate tax laws. Teh issue, brought to light by a resident of Pilaitė who contacted “delfi,” highlights a potential systemic problem where some homeowners avoid taxes while others diligently comply.
A tale of Two homes in Pilaitė
One homeowner, identified as Akvilė, exemplifies the compliant taxpayer. She and her family completed construction on their home and declared it within a reasonable timeframe.This contrasts sharply with the experiences of many of her neighbors,who,according to Akvilė,have left their properties undeclared for years,seemingly to avoid paying taxes. This situation has sparked concerns about fairness and the effectiveness of tax enforcement.
Akvilė’s experience contrasts sharply with that of her neighbors.According to her, many surrounding homes have remained undeclared for periods ranging from three to seven years, with residents openly admitting they avoid declaration to circumvent what they consider “inhumane taxes.” “They say that they are not stupid enough to pay real estate tax, because they already pay for the land, but this tax is a joke compared to real estate,” Akvilė relayed.
Uneven Enforcement Fuels Resentment
The discrepancy in compliance is creating a sense of injustice. Akvilė’s family declared their construction completed within a year and a half of starting, while nearby properties remain undeclared. She noted a similar pattern exists in Salotė street, and voiced a broader concern: “Honest people pay high taxes, and those who live nearby in the same house do not pay a cent. Where is the equality here? Why are we abused because we are honest?” She extended this observation to a village where her parents reside, stating that undeclared properties are commonplace even with lower tax rates. “There is something wrong with the system – everyone has to pay or no one has to pay,” she concluded.
Regulatory Framework and Oversight
According to the building inspectorate, a newly constructed building can be used after completion, with an exception for one- and two-family residential buildings. The inspectorate confirmed that data on building completion is registered in the Real Estate Register. Information regarding building permits and state supervision can be found through the Agency for Advancement of the Construction Sector and its “Infostatyba” information system.
The State Tax Inspectorate (VMI) clarified that unfinished buildings must be registered within three years of construction commencement, with data updated every five years.Diana Šalomskienė, head of the VMI’s Control Department, stated that failure to register results in a fine ranging from 140 to 300 euros, enforced by VTPSI. However, when asked for statistics on inspections and violations, the construction inspectorate did not provide any data.
Tax Implications and Reporting mechanisms
Currently, real estate tax applies to residential and other structures if their total taxable value exceeds 150,000 euros (or 200,000 euros for families raising three or more children or a child with a disability). Changes to this procedure are slated to take effect next year.
A VMI representative emphasized that even unfinished structures used for habitation are subject to tax if the resident’s total taxable property value exceeds the established limit. The VMI actively assesses taxpayer risk through declaration analysis, third-party data, public information, and resident reports.Residents are encouraged to report potential violations via the VMI hotline at +370 5 260 5060 or through a form on the VMI website.
Penalties and Recent Findings
If a taxpayer fails to declare and pay the required tax, the VMI calculates the unpaid amount, assesses late payment interest, and may impose a fine of 20 to 100 percent of the unpaid tax. In 2024 alone,tax inspections and investigations resulted in the calculation of an additional 123,000 euros in real estate tax. Despite these enforcement efforts, the VMI maintains that most taxpayers comply with tax regulations independently and on time. New real estate tax values will also be implemented next year,with details available through the Register Center.
The situation underscores a critical question about fairness and the effectiveness of tax enforcement in Lithuania, leaving many homeowners wondering if the system truly ensures equal treatment under the law.
