SWEDISH REAL ESTATE TAX ASSESSMENT...
Goce Milevski, ðóêîâîäèòåëü: Hans Lind
LibraryÈñòî÷íèê: Mass valuation of commercial real estate for taxation and balance sheet purposes.pdf
Present time! Real property assessment system in Sweden is centralized but costefficient. Data’s is collected, analyzed from official registers and by the official authorities. The assessment as process is represented by uniform CAMA system. All activities are transparent and rely on several levels for testing and double-checking.
Since the beginning of 80’s there has been a continual, periodical national wide tax assessment of property in Sweden. Particularly in 1979 a special Law, the Real Property Assessment Law (FTL) was introduced for estimating assessed value for taxation purposes. This law was used for the first time in 1981 for the general assessment. In this law is clearly projected that:
"The assessed value is based on its value on the open market and represents 75% of the market value during one specific year, known as reference year"
Main players in assessment process are Swedish National Tax Board (NTB) and National Land Survey (Lantmateriet) together with support from valuation experts of private sector.
Generally elaborated, Tax assessment in Sweden is cyclic process which is done schematically as follows:
- General Assessment is done every six years purposely to analyze real estate market and to indicate what changes in valuation zones or indexation need to be done, after previous general assessment.
- Simplified General Assessment take place three years after General Assessment, purposely to make test on valuation model within CAMA system.
- Special assessment can be done suddenly every year as result of newly erected building or if new settlements are developed etc.
According to the latest update of Fastighetstaxeringslag (1979:1152) regulations and schedule of general & simplified assessment are projected as follows:
Section 7; General assessment of real estate.
Beginning in 2003 and continuing in 6 years cycle, general assessment for single family houses.
Beginning in 2005 and continuing in 6 years cycle, general assessment for agricultural units.
Beginning in 2007 and continuing in 6 years cycle, general assessment for industrial, commercial units and apartment blocks.
Section 7a; Simplified assessment of real estate.
Beginning in 2004 and continuing in 6 years cycle, simplified assessment for commercial properties.
Beginning in 2006 and continuing in 6 years cycle, simplified assessment for single family houses.
Beginning in 2008 and continuing in 6 years cycle, simplified assessment for agricultural units.
From the regulations above we can notice that practically there are assessment activities every year which are divided according to their category and type of tasks. We can also notice that between general and simplified assessments (and vise versa) there are 3 years period for setting and executing sub processes.
General assessment process is divided on two sub processes, preparatory work and execution of assessment.
Lantmateriet is responsible for preparatory work as base of General Assessment. Tasks which are fulfilled in this sub process are: collecting and analyzing sales price,property transactions, market data collection, developing CAMA system, upgrading valuation model and tables, producing valuation maps etc.
Future execution of assessment calculations is based on value zones. The point of value zone is that there is one base value for one value zone. These value zones are represented on valuation maps which are created separately for each category of real estate.
As already initiated, real properties are categorized with idea to make the cyclic assessment process simpler and to distinguish properties for different use. So today we can recognize several categories of real properties.
CATEGORIES |
No: of taxation units |
No: of sales per year |
|
| 1 | Agricultural & forest units |
366000 |
3000 |
| 2 | Single family house units |
1699000 |
60000 |
Summer house units |
600000 |
10000 |
|
| 3 | Apartment block units |
128000 |
3000 |
Commercial units |
|||
| 4 | Industrial units, power plant, other |
162000 |
1500 |
| 5 | Special units which are exempt from
taxation |
84000 |
|
TOTAL |
3039000 |
77500 |
Commercial and Industrial units together with apartment blocks are valuated as a group, “commercial properties”, every three years. Main reason for grouping these categories is that they are profit generators. According the results from 2008 assessment, in Sweden there is 3390 value zones for this group of properties. 1910 value zones apply for commercial real estate & apartment blocks and the rest of 1480 value zones apply on industrial real estate.
Schools, hospitals, churches and some others socially oriented properties are excluded from taxation process.
During the preparatory work, because lack of information’s from official property transactions, according vacant space and rent price, additional forms are sent to the owners of commercial properties. Main reason for this is that rent price is “key factor” for estimating Net Profit of commercial property.
Swedish CAMA model relay on comparable sales approach as primary strategy. The effectiveness and precision is in tight correlation with number of officially registered transactions on the open market. Method for assessing commercial properties is based on the Gross Income Multiplier. As part of preparatory work, analyzing real estate market refers on examination of property transactions and reported rents and vacant space by property owners. As result we have GIM which future on will be used for assessing properties.
Property transactions such as heritage or gifts are not taken under consideration. After data collection and analyzing, test valuation take place within main reason to calibrate the valuation model and to initiate the necessary adjustments in valuation zones, if there are any!
As main factors / criteria for valuation of commercial properties are:
For land
- permitted land use
- development rights
- location
For building
- gross rent
- ownership & other rights
- Age
- Location
When its matter of property taxation, it has to be mentioned that tax rates are purely political decision. In 2008, tax rates for commercial properties are divided according each category:
- apartment blocks…..tax rate = 0,4%
- commercial units…..tax rate = 1,0%
- industrial units ……..tax rate = 0,5%
Swedish real estate market is very stable and have tendency to increase. This declaration is supported by the fact that total number of taxation units in 2007 is 2,955,557 and in 2008 are 2,979,170. Referred assessed value of Swedish real estate market for 2008 is 4, 896, 924 mil SEK