Property Tax: Market contradictions in Serbia

In the last few years, property tax in Serbia has been growing at a tremendous rate although real estate prices have been either declining or stagnating. Although, the government promised in August last year that property tax would remain the same, it seems that this promise has fallen through – at least in Belgrade.

Four months ago, the Belgrade City Assembly decided in favour of the 2% increase in property tax. So why is property tax growing when the value of the real estate is dropping? The answer probably lies in the fact that municipalities have been raising property tax in order to fill up their local budgets because, three years ago, they lost a substantial chunk of revenue when the land development fee had been abolished.

The prices of newly-built real estate have been growing in Serbia, while the prices of the older real estate have been stagnating. This is also what the State Geodetic Authority confirms after conducting a comprehensive real estate survey across Serbia covering a three-year-period.

Marija Raskovic from the Geodetic Authority says that, in Belgrade, they have assessed the value of real estate in eight municipalities. “The average price of real estate in Novi Beograd in 2014 and 2015 was 1,200 EUR per square metre, and 1,150 EUR per sqm in 2016. The average price of real estate in the municipality of Zvezdara was 1,100 EUR per sqm in 2014, and in 2015 and 2016, it fell to 1,050 EUR. The same can be said for Vozdovac”, Raskovic explains.

There haven’t been any fluctuations in the average price of real estate in Novi Sad – it still stands at 850 EUR per square metre. In Kragujevac, this price in 2014 was 800 EUR, and in 2015 / 2016 almost 750 EUR. The average price in Cacak was 600 EUR in 2014, and 550 EUR in 2015 / 2016”, Raskovic goes on to say.

Despite these figures, the tax administration kept on increasing the property tax. For instance, the property tax on an average price of a square metre of real estate in Vracar has been increased by 22% since 2014. Three years ago, the tax administration estimated that a square metre of real estate in this municipality in the heart of Belgrade was worth 145,000 dinars, while this year that figure stands at over 178,000 dinars.

The property tax regulation in Serbia is almost non-existent. The value of a piece of real estate is estimated on an individual basis, as is property tax on that real estate.

This is especially noticeable in Belgrade with the so-called zoning property tax. In the first zone, for instance, one can often find rundown buildings next to luxury ones. Yet, the same property tax rate is applied to both which is unheard of in more developed countries.

In these countries, before the tax administration estimates the rate of property tax for a certain piece of real estate,  the administration should provide a detailed, photographic description of the features of that real estate so there is no chance of a rundown flat having the same property tax applied as a luxurious one despite being in the same zone.

Acting Secretary General of the City of Belgrade’s Public Revenue Secretariat, Violeta Niciforovic says that the same principle is not applied in Belgrade. “The law does stipulate the criteria for determining the property tax rate. The city authorities or any local authorities, for that matter, cannot make up elements that would go into calculating property tax. We don’t have a real estate price estimation system for tax purposes here but we use a sales contract as the basis”, Niciforovic adds.

A licensed real estate agent Kaca Lazarevic agrees that the state has to reform the property tax system because the current methodology is faulty. She also believes that the property tax estimates are unrealistic on purpose because higher tax rate translates into more revenue for cities and municipalities.

(Newsweek, 17.03.2017)

http://www.newsweek.rs/srbija/82105-neuhvatljiva-logika-u-srbiji-cene-nekretnina-padaju-a-porez-na-imovinu-raste.html

 

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