When selling standing timber, the effective tax rate is 7.5%. When selling forest land, it's 25.5% on the capital gain. The difference comes down to one legal question: what exactly are you selling. We break down both regimes with worked examples.
Why 7.5% and 25.5% are two different worlds
A forest owner who decides to sell typically thinks one thing: "I own a forest, I'll sell it." But the tax system splits that single decision into two entirely different regimes. Which path you take determines whether you hand 7.5% or 25.5% to the state.
First regime: you sell standing timber — growing forest as a raw material. A simple mechanism applies: the buyer withholds 10% PIT, of which 25% is deemed deductible expenses, yielding an effective rate of 7.5% on the transaction amount. No declarations, no registrations — provided you make only one such transaction in any 12-month period.
Second regime: you sell forest land as real estate. This is a capital asset, and from 2025 income from its sale is taxed at a 25.5% PIT rate (up from 20%). The tax applies not to the full sale amount, but to the capital gain — the difference between the sale price and the acquisition cost. And here an important exemption appears: you pay nothing if the property was held for more than 5 years and was the seller's only real estate.
In practice, many owners confuse these two regimes. The result is either an overpayment or an unwelcome appearance on the VID radar with unregistered economic activity. This article walks through both regimes step by step with concrete numbers.
Selling standing timber: 7.5% with no paperwork
If you are an individual with no registered economic activity in forestry and you sell standing timber to a legal entity (logging company), the scheme is straightforward:
The buyer withholds PIT at 10% of the income. But before that, 25% is deducted from the payable amount as deemed expenses. The result: 7.5% of the transaction sum is withheld. You receive the net amount, and the tax obligation is fulfilled — the buyer pays it to VID on your behalf.
Example: you sell standing timber for €20,000. The buyer deducts 25% (€5,000) as deemed expenses. €15,000 remains, from which 10% is withheld = €1,500. You receive €18,500. Effective rate: 7.5%.
Transaction count needs care. Per the tax authority's guidance, if at least two transactions in standing timber or roundwood take place within 12 months, they may be treated as economic 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.
That is a VAT question, not an automatic reclassification of income tax. But if the transactions become regular and amount to a business in substance, the whole regime changes: income is then taxed at the progressive PIT rates, which since 1 January 2025 are 25.5 % on the portion of annual income up to €105,300 and 33 % above that. If you are planning more than one deal in a year, settle the question with the tax authority before the second transaction rather than after it.
One more nuance: if you sell harvested timber rather than standing trees, the deemed expense rate is 50%, not 25%. In that case, the effective tax rate drops to just 5%.
Selling forest land: 25.5% on the capital gain
When you sell forest land as real estate (rather than timber as raw material), the capital gains tax applies. From 2025, the rate was raised from 20% to 25.5%.
The tax base is not the full sale price, but the capital gain — the difference between the sale price and the acquisition cost. For example, if the land was bought for €30,000 and sold for €80,000, the capital gain is €50,000, and the tax is €12,750 (25.5%).
How the acquisition cost is determined depends on how the land was obtained. If purchased — use the purchase agreement amount. If inherited — the cadastral value at the time the inheritance opened. If gifted — the cadastral value. These details significantly affect the final calculation, so consulting VID or an accountant before selling is advisable.
But there is an important exemption. PIT on capital gains is not payable if two conditions are met simultaneously: (1) the property has been yours for more than 60 months, and (2) throughout the last 60 months before disposal it was your only property registered in the Land Register. This exemption also applies to forest land — if you own only one forest parcel and have held it for 5+ years, no tax is payable on sale at all.
One technical point decides these cases and is easy to miss: the 60 months run from the day the property was registered in the Land Register, not from the purchase contract or physical handover. The tax authority stresses this separately. If you inherited forest six years ago but registered it three years ago, three is what counts for the exemption.
A significant share of Latvia's forest owners live in exactly this situation — one parcel, inherited or bought long ago. But if you also own other real estate (an apartment, a house, another land plot), this exemption does not apply and you need to budget for the 25.5% rate.
There is a third route that fewer people know about. Where the only property has been registered in the Land Register for less than 60 months, the income is still exempt if it is reinvested in full into a functionally similar property within 12 months before or after the disposal. For an owner selling one parcel in order to buy another, that can be decisive.
Three scenarios with real numbers
To make the differences concrete, let's walk through three typical scenarios.
Scenario A: Jānis sells standing timber for €25,000. No registered economic activity, one transaction in 12 months. Buyer withholds 7.5% — €1,875. Jānis receives €23,125. No declarations needed. Fully legal.
Scenario B: Anna sells forest land for €90,000. She bought the land in 2019 for €40,000. Since 2021 she has also owned an apartment in Riga — the sole-property exemption does not apply. Capital gain: €90,000 – €40,000 = €50,000. Tax at 25.5%: €12,750. A capital gains declaration must be filed with VID.
Scenario C: Pēteris sells forest land for €70,000. The land was inherited from his father in 2017 and registered in the Land Register that same year, with a cadastral value of €25,000 at the time. Since receiving the inheritance, this has been Pēteris' only real estate. Registered for more than 60 months + sole property = exemption. Tax: €0. And because the income is not taxable, no capital gains declaration needs to be filed at all.
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, and who withholds the tax.
- Tax authority — income tax on capital gains — exemption conditions, the 60 months counted from Land Register registration, and declaration procedure.
- Tax authority — personal income tax rates — progressive rates of 25.5 % and 33 %, capital gains at 25.5 %.
- Ministry of Finance — on declaring capital gains — where the income is not taxable, no declaration is required.
- Law "Par iedzīvotāju ienākuma nodokli", section 9, first paragraph, point 33 (likumi.lv).
Disclaimer
Correction, 11.08.2026. An earlier version of this article quoted outdated progressive PIT rates (20 % up to €20,004; 23 % up to €78,100) — since 1 January 2025 they are 25.5 % and 33 %. It also described two transactions in 12 months as an automatic reclassification into economic activity, whereas the tax authority frames that under the VAT Act, and stated that a declaration must still be filed when the exemption applies — in fact it need not be. The 60 months counted from Land Register registration and the reinvestment exemption have been added.
This text is not tax advice. Rates and conditions 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.