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Determining the value of forest properties

Determining the value of a forest property is needed in practice whenever there is a change in forest ownership. The inheritance tax, gift tax, capital gains tax and transfer tax are calculated on the basis of the value of a forest property. The value can be determied by three different methods:  

  • Based on a forest property assessment prepared by a forest professional. 
  • Using the provincial estimated values of the forest land published annually by the tax authorities. 
  • Using some banks’ and forest companies’ applications. 

Forest property assessment

The value of the forest property is determined primarily based on a forest property assessment prepared by a forest professional. Forest property assessments are prepared by forest management associations, forest companies and forest service companies. The Finnish Forest Centre does not prepare forest property assessments.  

The most common assessment method used is the so-called sum-value method. In the assessment made by the sum-value method, the value of the forest property is determined for each forest compartment as the sum of the soil value, seedling stand value, felling value of growing stock and the possible expected value. The soil value, seedling stand value and the expected value coefficients are obtained  from regional tables or calculation programmes. In calculating the felling value of growing stock, regional average timber prices for several years are used. 

Finally, in the assessment made by the sum-value method, an adjustment is made for the total value per property, which takes into account the specific characteristics of the forests of each property as well as general management and administration costs. For forest property assessments, the tax authorities accept a correction of a maximum total value of 30 per cent without specific criteria. If a larger total value correction is used in the assessment, it must be justified separately.   

The value of the forest property can also be determined by the so-called productive value method, which estimates the future income and expenses of the forest property and discounts them to the present. The interest rate chosen has a significant effect on the result. The productive value method is commonly used in valuations made in connection with the establishment and joining of jointly owned forests.  

Using the tax authorities’ estimated values

In changes of ownership of small or smaller forest areas, the estimated value of the forest land can be used instead of the forest property assessment. The estimated values ​​of the forest land are based on average forest property trade prices, and they vary from province to province and change from year to year. The estimated values ​​and instructions for determining the fair value of forest properties currently in use can be found in Finnish on vero.fi under ”Varojen arvostaminen perintö- ja lahjaverotuksessa” (valuation of assets in inheritance and gift taxation). New regional forest land value data ​​is usually published in November-December.  

Forest areas of less than 60 hectares are considered small or smaller forest areas in Lapland, forest areas of less than 30 hectares in Northern Ostrobothnia and Kainuu, and forest areas of less than 15 hectares elsewhere in Finland. Even a large forest property can be abandoned one property at a time using the estimated value, if at each stage a forest area of ​​less than the above-mentioned area is abandoned. 

When the estimated value is used, the forest areas indicated by the tax authorities can be used as the forest land area​​, which can be found in the asset breakdown of the pre-filled tax return by property. 

If a forest area is larger than the above-mentioned limit value, and if a forest property assessment is not available as a basis for the valuation of the forest property, even then the value of the forest property can be determined on the basis of provincial hectare values ​​and forest land area. 

Using calculators developed by banks and forest companies

Banks and forest companies have developed automated calculators that can be used to make a rough forest property value calculation based on numerical forest resource data. The tax authorities also accept these calculations for use in determining the value of forest properties. When using these applications, always make sure that the forest resource information used in them is up-to-date.  

Forest plans and Metsään.fi service help to determine the forest property value

A recent forest plan is an excellent basis for preparing a forest property assessment. The forest plan also helps in planning felling and maintenance work that is often done when there is a change of ownership.  

If there is no forest plan, information on forest properties and forest compartments can also be found in the Metsään.fi service maintained by the Finnish Forest Centre.

More information