Selling cirsma is not a capital gain — it is income from the use of property, taxed at 10 %. Cirsma and harvested roundwood are two different transactions with 25 % and 50 % expense allowances, so the effective burden is 7.5 % and 5 %. Five scenarios with numbers and links to the tax authority's own guidance.
Who this affects and for how much
In Latvia a private individual's forest transaction is subject to personal income tax, but the final bill is set less by the rate than by the form of the deal. Selling cirsma is income from the use of property and carries a 10 % PIT rate. It is not a capital gain taxed at 25.5 %, and that confusion is the single most common mistake in this area. Cirsma — the sale of standing timber for felling — and the sale of harvested roundwood are legally distinct transactions with statutory expense allowances of 25 % and 50 % respectively. A VAT obligation arises when at least two transactions take place within 12 months and their combined value exceeds €50,000.
Key points
- Selling cirsma is not a capital gain; the PIT rate is 10 % of income
- Expense allowances: 25 % for standing timber sold for felling, 50 % for roundwood after felling
- Effective burden: 7.5 % of gross (cirsma) versus 5 % (roundwood)
- VAT: at least two transactions in 12 months and a combined value above €50,000
- If the buyer is a company, the buyer withholds and pays the tax
- A SIA is worth considering at a steady high turnover, not for occasional sales
Cirsma and roundwood are two different transactions
Many owners use "cirsma" as a synonym for "selling the forest". Legally it is not. What you actually hand to the buyer determines the tax regime, the paperwork, and sometimes the ownership of the land itself.
Cirsma is the sale of the right to fell a defined volume of standing timber. The buyer arrives with a harvester, fells and hauls; the land stays with the owner. Roundwood is the sale of logs already cut: the owner or a contractor fells the stand, sorts it into assortments and stacks it at the roadside, and only then does the buyer take the batches and pay per cubic metre by grade.
Selling the whole cadastre together with the land is a third, separate category — and that one genuinely is the disposal of a capital asset, taxed as a capital gain at 25.5 %. This third case must not be conflated with the first two: forest as real estate can be a capital asset, but selling standing trees for felling is not.
Most private sellers choose cirsma because it requires no investment in machinery or logistics. The roundwood regime is better on tax but carries real operating costs.
The base case: selling cirsma
Income from the disposal of standing timber for felling owned by a private individual is taxed at 10 % PIT. The taxable base is income less expenses, and here the owner has a choice: the statutory 25 % expense allowance with no supporting documents, or documented expenses where these exceed 25 % of income (compartment marking, cadastral work, VMD inventory, legal fees).
With the 25 % allowance the effective burden is a straight multiplication:
10 % × (1 − 0.25) = 7.5 % of gross income.
On €40,000 of cirsma income, €3,000 goes to the budget and €37,000 to the owner. If the owner holds receipts for €15,000 of expenses — 37.5 % of €40,000 — declaring those beats the 25 % allowance. The effective rate then falls to 10 % × 62.5 % = 6.25 %.
Who you sell to matters too. If a company or a registered business buys the cirsma, the buyer withholds and pays the tax. If the buyer is a private individual not carrying out business activity, the seller calculates and pays the tax through the annual income declaration.
Selling cirsma in Latvia is taxed at 10 % PIT after deducting the statutory 25 % expense allowance — an effective burden of 7.5 % of gross (tax authority guidance via LV portāls, 06.11.2025).
The alternative: selling roundwood
For harvested roundwood the statutory expense allowance is 50 %. It stands in for the real cost of preparation: the harvester contractor, the forwarder, roads, stacking and sorting into assortments.
With the 50 % allowance the effective burden works out as:
10 % × (1 − 0.50) = 5 % of gross income.
On the same €40,000 the tax is €2,000 rather than €3,000 — a €1,000 difference in favour of roundwood. But that is arithmetic only. In practice the roundwood seller organises the harvest personally or hires a contractor, pays for extraction to the roadside, sorts by assortment and keeps documentation for every batch. Those costs comfortably exceed the €1,000 gap, so the tax argument alone does not decide the question. If the contractor works without a formal contract, the costs will not be accepted under the documented route.
The simple rule: roundwood wins on tax only when the owner, or a contractor they trust, actually prepares the stand and delivers it to the road. Otherwise cirsma with the 25 % allowance is simpler and often nets more.
Why the 60-month rule does not help with cirsma
A belief circulates among forest owners: if you have held the forest for more than 60 months, the income is exempt. For cirsma this is wrong, and the error is expensive — people simply fail to declare the income.
The 60-month rule applies to capital gains on the disposal of real estate. Selling cirsma is not the disposal of a capital asset: the land stays with the owner and only the right to fell standing trees changes hands. Holding period therefore has no effect on cirsma tax — the 10 % rate and the 25 % allowance apply whether the forest was acquired last year or through 1990s restitution.
Where the rule does bite is the sale of the property itself, land included. That is a capital asset, the rate is 25.5 %, and the holding period becomes decisive. There it also matters that the period runs from registration in the Land Register rather than from physical handover, and that inherited property keeps the deceased owner's holding period.
If a specific deal is unclear, submit an advance query to the tax authority through the EDS system. A large transaction without that answer in hand is a risk.
The €50,000 VAT threshold
VAT is a separate story, unconnected to income tax. And it does not turn on the amount alone: per the tax authority's guidance, if at least two transactions in cirsma or roundwood take place within 12 months, that can qualify as business activity under the VAT Act. If the combined value of those transactions exceeds €50,000, a person not registered for VAT must pay VAT on the excess. Voluntary registration before crossing the threshold is also possible. The standard rate in Latvia is 21 %.
The practical consequence: one large transaction and two medium ones of the same total value are not equivalent. In our VMD sample the median mature private cadastre holds 534 m³, the 75th percentile 1,065 m³ and the 90th percentile 2,351 m³. At market prices that means the threshold becomes real rather than theoretical for any mid-sized owner selling more than once every two years.
After registration the operating model changes. VAT of 21 % is added to the price; a corporate buyer reclaims it, so it is neutral for the seller. In exchange the seller gains the right to recover VAT on costs and the obligation to file returns even in periods with no transactions.
A VAT obligation arises where there are at least two cirsma or roundwood transactions in 12 months and their combined value exceeds €50,000 — the tax is paid on the excess (tax authority guidance via LV portāls, 06.11.2025).
When a SIA starts to make sense
At a steady, repeating annual turnover it is worth considering a company. A Latvian SIA has operated since 2018 under a corporate income tax regime with three defining features.
First: 0 % tax on retained profit. While the money stays in the company and is reinvested, there is no tax. Second: on distribution, corporate income tax applies to dividends — confirm the exact rate and coefficient for the year of the transaction with an accountant or the tax authority. Third: a clean separation of personal and business assets.
The decisive point is the comparison base. For a private individual the effective burden on cirsma is 7.5 %, and on roundwood 5 %. That is a low bar for a company to beat, so the case for a SIA in forestry is usually not tax saving but structure: portfolio consolidation, outside financing, multiple owners, limited liability.
The costs run the other way. A SIA needs bookkeeping and annual accounts, brings beneficial-ownership transparency and social contributions if there is a resident director. And crucially: the private individual's 10 % regime with statutory expense allowances does not extend to legal entities at all.
Five worked scenarios
Every example rests on the distribution of private cadastres in our VMD sample — 81,575 mature private forest cadastres. Stumpage prices are taken as a weighted average of roughly €68/m³; the price of any specific deal depends on species mix, assortments and access, so the revenue column is a reference point rather than a forecast.
| Scenario | Volume, m³ | Cirsma revenue, € | PIT, cirsma (25 % allowance, 7.5 %) | PIT, roundwood (50 % allowance, 5 %) | VAT |
|---|---|---|---|---|---|
| Small | 200 | 13,600 | 1,020 | 680 | none |
| Median | 534 | 36,312 | 2,723 | 1,816 | none (single deal) |
| 75th percentile | 1,065 | 72,420 | 5,432 | 3,621 | if 2+ deals in 12 months |
| 90th percentile | 2,351 | 159,868 | 11,990 | 7,993 | if 2+ deals in 12 months |
| Large | 7,000 | 476,000 | 35,700 | 23,800 | effectively unavoidable |
Two things stand out. The choice between cirsma and roundwood moves the tax by half again — but in absolute terms the gap on a median deal is €907, which harvesting costs swallow easily. And even in the largest scenario the effective burden stays at 7.5 %: Latvia's regime for private forest owners is comparatively light, and the real losses come not from the tax but from the price the owner agrees to.
Six typical mistakes
The first mistake is confusing cirsma with a capital gain. Cirsma is taxed at 10 % PIT, not at the 25.5 % capital gains rate — that applies to selling forest land as real estate. The confusion leads either to overpayment or to a wrong declaration.
The second: ignoring the VAT conditions. An owner closes two deals in a year, never adds them together, and later receives a notice about unpaid VAT on the excess.
The third: not keeping expense records. Receipts for inventory work, lawyers and contractors let you declare documented expenses instead of the 25 % allowance when they are larger. Without receipts only the basic allowance remains.
The fourth: relying on the 60-month exemption for a cirsma deal. It does not apply; holding period changes the tax only when you sell the property itself with the land.
The fifth: setting up a SIA "just in case" with no turnover. The private individual's 7.5 % burden is a low bar, and the running costs of a company do not earn it back at modest volumes.
The sixth: signing a cirsma contract without stating volume and assortment structure. The common practice of "selling the forest for €25,000" with no link to cubic metres is the leading cause of disputes after extraction. The contract needs the total volume in m³, the split by assortment, a price per assortment, a validity period, and the measurement procedure after felling.
FAQ
Is cirsma a capital gain at 25.5 % or income tax at 10 %?
Income tax at 10 %. The tax authority states it directly: selling cirsma does not count as a capital gain. Forest as real estate can be a capital asset, but disposing of standing trees for felling is not the disposal of a capital asset. The 25.5 % rate applies to selling the forest land itself.
Who pays the tax — me or the buyer?
It depends on the buyer. If a company or a registered business buys the cirsma, the buyer withholds and pays. If the buyer is a private individual not carrying out business activity, the seller calculates and pays through the annual declaration.
I inherited the forest two years ago. Does that change the cirsma tax?
No. Holding period does not affect cirsma tax — the rate is 10 % regardless of how long the forest has been owned. The period matters only when selling the property itself with the land; there, inherited property keeps the deceased owner's holding period.
I live in another EU country but the forest is in Latvia. Where is the tax due?
In Latvia. Income from selling cirsma is Latvian-source income. If your country of residence has a double taxation treaty with Latvia, the amount paid in Latvia is taken into account at home.
Can I split a cirsma into several deals to stay under the VAT threshold?
No — and splitting works against you. It is precisely several transactions within 12 months that turn the activity into business activity under the VAT Act. Structuring deals to avoid tax gives the authority grounds to assess the unpaid amount plus penalties.
Sources
- Tax authority guidance "Kādi nodokļi privātpersonai jāmaksā no cirsmu pārdošanas" (LV portāls, 06.11.2025) — 10 % PIT, the 25 % and 50 % allowances, VAT conditions.
- Tax authority manual "Nodokļi darījumiem ar kokmateriāliem" — how the tax is applied and withheld.
- Tax authority — personal income tax rates — progressive rates and the 25.5 % capital gains rate.
- Law "Par iedzīvotāju ienākuma nodokli" (likumi.lv).
- Law "Pievienotās vērtības nodokļa likums" (likumi.lv).
- VMD State Forest Register, Q2 2026 release (our sample: 81,575 mature private forest cadastres averaging 534 m³).
Disclaimer
Correction, 11.08.2026. An earlier version of this article wrongly described the sale of cirsma as a capital gain taxed at 20 % and stated effective burdens of 15 % and 10 %. That does not match the tax authority's guidance: the correct rate is 10 %, and the effective burdens are 7.5 % and 5 %. The article also wrongly stated that the 60-month rule could exempt cirsma income from tax. All calculations and conclusions have been recomputed.
This text is not tax advice. Specific rates, expense allowances and regimes can change, and an individual situation may call for a different reading. Before a transaction, consult a licensed tax adviser or file an advance query with the tax authority through the EDS system.