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If you want to generate income from the forest while keeping it as your own property, an alternative is to sell the harvesting rights. This means that the owner offers to buy the trees growing in his forest, but the land on which they grow remains his property.
How to get felling rights?
First, you need to obtain a felling certificate from the State Forest Service. Forest owners who have a lot of knowledge and experience in forest management usually organise this process themselves. They also work out the approximate value themselves or with the help of experts, so that they can offer the harvested timber to buyers. It is another thing if you have no idea where to start, no spare funds to prepare the forest for harvesting and no harvesting certificate. In this case, the preparation process and the financial burden can be left to the buyer by offering to buy the felling rights for the trees in the forest.
From 2023, the fee (state fee) for obtaining a felling certificate has increased significantly. Instead of the current €4.27, there will be an increased fee for clear felling (clear felling and random felling) of €30-70 depending on the area; for maintenance felling of €20-30 depending on the area; a single certificate will include up to three felling operations of the same type.
Everything must be agreed before the contract is signed
A valid forest inventory or tax survey is required to sell trees growing in a forest. A tax assessment is valid for 20 years. The potential buyer will do the rest. The buyer will assess the forest in the light of the information and make an offer. This is mainly determined by market trends – the demand for the tree species growing in the forest and the current price, not only on the local market but also on the world market. For example, when the demand for a range of firewood decreases, the value of a forest dominated by white alder also decreases. Unless the forest owner has given specific instructions on what the buyer should take into account when calculating the price, the price will most often include the maximum work plan allowed by the forest and the regulations. Later, the buyer will prepare the forest for felling on the basis of this plan: organising staking, measuring diameters, preparing sketches, clearing boundary stakes – everything necessary to obtain a felling certificate.
To avoid misunderstandings, e.g. the buyer has paid the forest owner according to the maximum work plan, has invested resources to prepare the forest for harvesting and to obtain the felling certificate, but the forest owner changes his mind and does not want to work on a specific area, everything must be agreed before the work starts. Otherwise, the seller may have to repay the value of the plot and the money invested, to the detriment of the buyer. It is therefore important to remember: if the owner has trees or plots that he wants to preserve, if he does not want to clear-cut a plot or does not want to clear-cut at all, if the only obstacle to selling the felling rights is an expired forest inventory, the forest owner must discuss and agree all this with the buyer before the contract is signed! It is very important that both parties are on the same page and understand each other!
The buyer must be responsible for the result of the logging
Logging rights transactions consist of two parts – a pre-logging phase and a post-logging phase. The pre-processing phase is when the best price offer is received and the contract is concluded. But very often the post-harvest phase is forgotten by the owners. Will the highest bidder be prepared to take responsibility for the result of his work? Will they level the ruts made by forestry machinery, put the roads and culverts back to their original state, clean up the stacking areas? Will the buyer prepare a report on what has been done in the forest after harvesting for submission to the State Forest Service so that the owner has correct information about his forest? This should be discussed when choosing a buyer.
Most Popular Types of Logging
Clearcutting – the complete cutting down of a forest. Clearcutting is strictly regulated by legislation, which sets parameters for cutting and requires specific documentation, as well as limiting the total area that can be cleared. It should be noted that after clearcutting, the forest must be restored within five years—if natural regeneration does not occur, the forest must be replanted. Additionally, funding for forest restoration is already accounted for at the time of the transaction: in the case of cutting rights, 25% of the sale price is exempt from personal income tax (PIT) so that this amount can be allocated to forest restoration.
Selective logging is the partial or gradual cutting down of a forest, but the forest is never completely cut down. This can be an alternative method used for cutting forests of various ages or in areas where clearcutting is prohibited. This logging method is often chosen by landowners who prefer forest management without clearcutting. However, such a choice requires great care and expertise to ensure that the intended positive effect does not become a negative outcome.
Thinning improves the growth conditions of the forest by providing more light, space, and nutrients to the remaining trees in the forest.
Main Benefits for a Forest Owner When Selling Logging Rights
The land on which the forest grows remains the property of the forest owner. It can be inherited by future generations. Additionally, if needed, the land can be sold at any time. By selling logging rights, the owner receives money from the transaction, saves time, and avoids incurring additional expenses.
Transactions involving logging rights are subject to a 7.5% tax, which is derived by withholding 10% personal income tax (PIT) from the taxable income, which is 75% of the sale price.
If the seller is an individual and not engaged in economic activity, the buyer is responsible for withholding PIT from the sale price and making the tax payment to the state budget on behalf of the seller.
From the owner’s perspective, a less positive aspect is that when selling logging rights, they do not yet know the development plan and the volume to be cut, as the buyer has paid for the right to prepare the forest for logging and obtain a logging permit according to their own price offer.
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