Property tax reform

From 1 January 2025, the newly calculated property tax will apply. In order for the property tax reform to be successful, property owners will have to submit a property tax declaration. It is already clear that the long-planned property tax reform will be cheaper for some people - and more expensive for others.

Value-based calculation models

Tax offices and municipalities are working flat out to prepare for the new property tax. No wonder, since the old property tax will be abolished by 2025 at the latest. The background: On 10 April 2018, in a sensational ruling, the Federal Constitutional Court declared the previous property tax regulations unconstitutional. However, the judges' decision did not come as a surprise. Owners of houses, flats and land have long felt that property tax is highly unfair. Given the fact that outdated property values were used to calculate the property tax, this resentment is understandable. After all, the data in western Germany dates back to 1964, and in eastern Germany even to 1935.

Revenue-neutral property tax reform - no additional revenues planned

Things should be fairer in future. After all, property tax is one of the most important sources of income for local authorities, paying for roads, swimming pools and kindergartens: In principle, the tax should be revenue neutral. This means that there are no plans to generate additional revenue for the state. However, revenue neutrality does not mean that some citizens will pay more. On the contrary, the tax burden of other citizens could even fall. In the future, the tax burden will depend on the situation. Put simply, if the location of the property or land has become more attractive since 1964 or 1935, then an increase in the property tax burden can be expected. Tenants may also face additional charges. As before, property tax can be passed on in the form of operating costs. Tenants are therefore likely to pay more in the future, especially in urban centres.

This is how property tax will look in the future

Three decisive factors are used to calculate the new property tax:

• Property tax value
  This factor describes the value of the property. This value will be reassessed with the reform. The property tax value is determined by the tax offices.
• Tax measurement figure
  This factor describes a legally defined calculation figure. It depends on the type of property.
• Rate of assessment
  For local authorities, the assessment rate is a decisive factor in calculating the amount of property tax. In contrast to the assessed value, the assessment rate applies to the entire municipality.

From July 2022 - property owners must submit a property tax return

To ensure that the new property tax can be calculated fairly and equitably, the authorities have to revalue around 36 million properties in Germany. This valuation includes developed and undeveloped properties as well as agricultural and forestry businesses. The cut-off date for the valuation of properties is 1 January 2022 and owners will be asked to submit a property tax return.

Important: Different regulations apply to the various federal states, as each state has been able to adopt its own calculation model for property tax. As a result, there are three different models for calculating property tax from 2025:

• Federal model
• Area factor model
• Land value model

Federal model

The federal model applies in eleven federal states (North Rhine-Westphalia, Rhineland-Palatinate, Saxony, Berlin, Schleswig-Holstein, Brandenburg, Saxony-Anhalt, Thuringia, Bremen, Saarland and Mecklenburg-Western Pomerania). The proposal originates from the federal government and probably involves the greatest effort for the owners. The aim is to record the values of land and buildings as accurately as possible. Data is to be provided for the following areas:

• Land register data
• Type of use
• Standard land value
• Reference number of the standardised value
• Living space
• Type of property
• Number of flats and size
• Number of garages and parking spaces
• Age of building
• Plot area

Area factor model

The area factor model is used in Bavaria, Hesse, Lower Saxony and Hamburg. This data is collected using the area factor model:

• Land register data
• Type of use
• File number of the standardised value
• Living space
• Plot area

Land value model

For Baden-Württemberg, the land value model is an exclusive regulation for calculating property tax from 2025, making it particularly easy for property owners. The decisive factors for calculating the new property tax are the floor area and the officially determined standard land value. The size and value of the building are irrelevant when determining the property tax. The following data must be compiled:

• Land register data
• Type of use
• Standard land value
• Reference number of the standardised value
• Plot area

The following applies to all federal states: The property tax return must be submitted between July and the end of October 2022. The property tax return is submitted via the Elster digital tax platform. However, for owners without the appropriate technology and older people, it is also possible to submit the traditional paper return.

Important: Deadlines must be strictly adhered to. The tax offices only send out one reminder. After that, there is a risk of default surcharges and fines of up to 25,000 euros.

Determination of property tax data - high costs for owners

Collecting the necessary data is likely to be a challenge, especially for owners who will have to pay property tax under the land value model from 2025. However, the other calculation models also require a great deal of effort on the part of the owner. A visit to the Land Registry is recommended to find out the area of the plot and the plot number. Information on the official standard land value can be researched using the online system "Boris". You can usually find out the current price per square metre of your property free of charge.