Determining the true market price: what did tax disputes reveal?
In recent years, a number of decisions have been made that addressed issues related to determining the actual market price. These disputes have revealed that market price determination is relevant not only to businesses but also to individuals. Property valuation is an integral part of tax law, often determining the outcome of tax disputes.
In one of the most recent tax cases examined by the Supreme Administrative Court of Lithuania (LVAT) (decision of 12 March 2025 in administrative case No. eA-1115-575/2025), it was decided whether the tax administrator, during a tax audit, had reasonably recognised the benefit received by shareholders from the purchase of real estate (an apartment) from a related company at a price lower than the actual market price as income in kind, when the actual market price was determined on the basis of an expert opinion.
In resolving this dispute over the sale price of real estate (an apartment) between related parties, which was almost twice lower than the market price, the Supreme Administrative Court of Lithuania recognized that the taxes had been calculated reasonably. In this case, the Court emphasized that the tax administrator's determination of the actual market price of the property based on a consultation on the possible sale price of the property, rather than a property valuation report, was appropriate, because the company did not seek to cooperate with the tax administrator and did not provide the conditions for obtaining a property valuation report (the owners did not allow access to the apartment).
The Supreme Administrative Court of Lithuania considered that the consultation prepared by professional experts was well-founded, as it analyzed the market, the location of the apartment, and other important factors. The conclusions of the consultation are also supported by the data in the case file on the prices of new real estate sales in Vilnius, published in the public domain, and mass appraisal prices.
The Commission notes that determining the true market value is relevant for tax administration purposes for both the tax administrator and taxpayers, for example, when calculating income, real estate, profit, or inheritance taxes (see the attached table for details). It should be noted that the actual market price is the value at which the property would be sold between unrelated parties operating under free market conditions, having all the necessary information and not influenced by external factors. Essentially, the actual market price is an economically justified price that would be agreed upon by independent parties.
The Commission provides insights gained from dispute practice:
- Tax laws do not provide for a mechanism for calculating the actual market price, so various means of proof may be used. Market data may be limited, especially when valuing unique or intangible assets. When assessing whether the value of the selected asset or service corresponds to the actual market price, the following may be taken into account prices of items bought and sold under similar conditions at the same time valuations performed by asset appraisers in accordance with the procedure established by law, standards published by competent authorities, such as the value of assets used by insurance companies for insurance purposes, interest rates on relevant loans published by banks, etc. In the practice of the Supreme Administrative Court of Lithuania, there are cases where the taxpayer's calculations of the purchase price of shares based on the financial statements of the company that issued the shares were approved (case No. eA-925-968/2022). Transactions between associated entities must be based on pricing methods established by law in cases specified by law.
- A taxpayer who disagrees with a mass real estate valuation or with a valuation performed by the tax administrator may request an individual valuation. Property valuation reports prepared by qualified appraisers are generally considered to be the main objective evidence establishing the true market price and allowing the parties to a tax dispute to justify their position. The report must contain all data, sources, and calculations supporting the valuation results.
- When several property valuation reports are used in a dispute (e.g., those of the tax administrator and the taxpayer), the authority examining the dispute assesses which report is more accurate (for example, in one case (LVAT case No. A-442-2927/2011), the report based on a larger number of similar transactions that took place closer to the valuation date was recognized as more accurate.
- The actual market price may be determined not only by a property appraiser, but also on the basis of an expert opinion prepared by a court-appointed expert who is included in the list of court experts. In one case, guided by the principle of justice, the Court ruled that the expert's conclusion, which was more favorable to the applicants (LVAT, case No. eA-4075-556/2021), should be recognized, regardless of the property appraiser's conclusion. Expertise appointed in another related case, not necessarily a tax case, may also be relied upon. For example, in its ruling of 5 April 2023 in administrative case No. eA-799-1047/2023, the Supreme Administrative Court of Lithuania relied on expert reports submitted in a related civil case.
- One of the main indicators that the purchase or sale price of real estate does not correspond to the actual market price is a significant difference between the price specified in the transaction and the average market value determined by the State Enterprise Centre of Registers. There is no specific answer in court practice as to what discrepancy is decisive – this is assessed according to the circumstances of the specific case, but dispute practice has revealed that a discrepancy of more than 20-30% may raise questions about the transaction's compliance with the actual market price.
- There are cases where taxpayers artificially distribute the value of their assets in order to take advantage of tax breaks. For example, LVAT case No. A-413-575/2019 examined a case where the value of apartments, the sale proceeds of which are taxable, was artificially reduced, while the value of the land plot, the income from which is not taxable (because it has been held for more than 10 years), was increased. The court confirmed the values redistributed on the basis of the valuation report in accordance with market prices.
- When property is acquired at a price lower than the market price, the tax administrator may calculate the income in kind. In one case (case No. eA-748-575/2024), the Supreme Administrative Court of Lithuania confirmed that the taxpayer, by acquiring a plot of land at a preferential price, received undeclared income in kind. In another case, it was established that a sole proprietorship, having transferred property to its owner free of charge, generated taxable income for both the company and the natural person. In this case, the most favorable market price determined by an independent appraiser was applied (case No. eA-1233-438/2019).
- When property is purchased at a price higher than the market price, it may be recognized that the resident has received other income (the difference between the sale price and the established average market price), which is subject to income tax (LVAT, case No. eA-609-575/2019).
- Concluding a transaction at the actual market price does not guarantee that individuals will not attract the attention of the tax administrator. This happens in cases where transactions, even if concluded at market price, are aimed at tax benefits rather than economic benefits. For example, in LVAT case No. eA-85-789/2025, it was agreed that the conclusion of intermediate securities (VP) transactions between the applicant and her son had no economic logic other than the intended tax benefit. As a result of these transactions, the applicant's SS sales decreased and her son's income became taxable at a rate of 15% instead of 20%.
The table shows cases of determining the transaction or asset or market price (value) for tax purposes from the perspective of the tax administrator and the taxpayer:
Last updated: 20-11-2025
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