According to the provisions of Article 7, paragraph 1. of the Law on Property Taxes, the basis of property tax for the immovable property of a taxpayer who keeps business books and whose value is reported in the business books according to the fair value method following international accounting standards (IAS), i.e. international financial reporting standards (IFRS) and adopted accounting policies is the fair value stated on the last day of the taxpayer’s business year in the current year.
According to the opinion of the Ministry of Finance, no. 011-00-00698/2021-04 from July 1, 2021. for the fair value of the real estate shown in the taxpayer’s business books on the last day of the taxpayer’s business year in the year preceding the year for which the property tax is determined and paid to form the basis of the property tax, all prescribed conditions must be met:
- that the specific obligee has the status of an obligee who keeps business books under the Law
- that the taxpayer reports the value of the real estate in the business books using the fair value method under international accounting standards (IAS), i.e. international financial reporting standards (IFRS) and adopted accounting policies, as well as
- that the value of the real estate in the business books of the taxpayer was stated following IAS, i.e. IFRS and adopted accounting policies on the last day of the business year of the taxpayer in the current year (i.e. the year preceding the year for which the tax liability is determined.
International Financial Reporting Standard for Micro Legal Entities and Fair Value of Real Estate
According to the provision of Article 26 of the Law on Accounting in recognition, valuation, presentation and disclosure of items in financial statements, micro legal entities and other legal entities referred to in Article 2, item 2) of the Law on Accounting, irrespective of size, shall apply secondary legislation passed by the Minister in charge of finance, such legislation being based on the general accounting principles. By way of exception, micro legal entities and other legal entities referred to in Article 2, item 2) of the Law on Accounting, irrespective of size, may decide to apply IFRS or IFRS for SMEs in recognition, valuation, presentation and disclosure of items in financial statements.
In the case that they decide to apply IFRS or IFRS for SMEs in recognition, valuation, presentation and disclosure of items in financial statements, micro legal entities and other legal entities referred to in Article 2, item 2) of the Law on Accounting, irrespective of size, shall apply IFRS, i.e. IFRS for SMEs continuously, i.e. for five years at the minimum from the beginning of application of IFRS, i.e. IFRS for SMEs, except in cases of the opening of bankruptcy or liquidation proceedings.
Therefore, if, following the provisions of Article 26 of the Law on Accounting, micro legal entities and other legal entities from Article 2, item 2) of the Law on Accounting, regardless of their size, decide by accounting policy to recognize, value, present and disclose positions in financial statements apply IFRS, from the first following year, the property tax base for real estate whose value in the business books has been stated at fair value will be the fair value stated on the last day of the business year.
Last update: 11. 8. 2023.
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