The new property tax 2022 - the most important issues at a glance

The legislature passed a new property tax assessment base in the fall of 2019. The new regulation is to come into force from 2025. What does this mean for you as a property owner?

In the following, we have compiled the most important questions and answers around the Property Tax Reform 2022 for you.

General information property tax

What is the property tax?

In Germany, the property tax is a tax on land and real estate, but also on hereditary building rights to domestic land and its development, which the owner has to pay. In the case of leasing, the property tax can be passed on to the tenants via the operating costs. The levying of the property tax is governed by the Property Tax Act (GrStG).

The revenue generated by the property tax accrues exclusively to the cities and municipalities. Currently, it is almost 15 billion euros annually. This makes the property tax one of the most important sources of income for the municipalities. The municipalities need these funds to finance schools, daycare centers, swimming pools or libraries and to make important investments in local infrastructure such as roads, bike paths or bridges.

Why was a reform of the property tax decided?

The Federal Constitutional Court has declared the current system of property tax assessment unconstitutional, as it treats similar properties differently and thus violates the requirement of equal treatment enshrined in the Basic Law. Starting from 01.01.2025 a legal reorganization will come therefore to the application.

The past computation of the land tax is based on decades-old property values (the so-called unit values): In the West, the properties are taken into account according to their value in 1964. In the new Lands of the Federal Republic the underlying values are even older, they are based on determinations from the year 1935.

These standard values are multiplied by a uniform factor, the so-called tax measurement figure, and then by the so-called assessment rate.

While the respective tax office determines the tax measurement figure via the property tax assessment notice, the assessment rate - and thus ultimately the property tax amount - is determined independently by the municipalities. Due to the opening clause within the framework of the property tax reform, the federal states will in future be authorized to enact and implement their own laws on property tax. In the meantime, it is clear that the majority of the federal states will implement the federal model (partly with minor modifications), while some federal states have decided against it and apply their own calculation method, e.g. a pure 'area model', a 'residential location model' or an 'area factor model', which, in addition to the size of the property, also takes into account its location.

Independent of the above-mentioned model variants, the amount of the property tax will also be determined in the future essentially by the municipalities via the so-called assessment rate. Therefore it can come in the individual Lands of the Federal Republic and municipalities to substantial deviations with the land tax load of individual properties. The Federal Government regulates over the evaluation law only the unit value.

Since the values of properties and buildings developed since 1935 and/or 1964 both in the west and in the east very differently, it comes up-to-date to serious fiscal unequal treatments, which are not to be agreed upon according to opinion of the Federal Constitutional Court with the legal basis of the land tax any longer. As a result, property tax payments have become decoupled from the actual values of the properties.

The cut-off date for the redefinition of the standard values is based on the official standard land values as of the cut-off date of January 1, 2022. From 2025, the new property tax values will then apply as the basis for assessment, as well as the new property tax measurement figures and municipal assessment rates.

Calculation of the property tax

When do I have to pay the new property tax?

The then calculated on the basis of the respective state model property tax is payable from 1 January 2025. The future amount of the individual property tax can not yet be named today, because first the values of the properties and statistical rent levels must be determined. It will probably still take a few years until the specific amount of the respective future property tax is determined.

How is the property tax calculated under the federal model in the future concrete*?

According to the following principle, the amount of property tax will continue to be determined:

Property tax value x tax rate x assessment rate = property tax

The tax office determines the property tax value on the basis of a declaration of assessment, the tax rate is determined by law and the assessment rate is determined by the city or municipality.

1. Step: Calculation of the property value: the main factors are the respective value of the land (standard land value) and the amount of the statistically determined net cold rent, which depends, among other things, on the so-called rent level of the respective municipality (the higher the rent level, the higher the rent tends to be in a municipality). Other factors include property area, property type, and the age of the building. The classification of municipalities into rent level tiers was done on the part of the Federal Ministry of Finance based on data from the Federal Statistical Office on average rents in all 16 German states.
2. Step: Compensation of the value increases that have arisen in the comparison of the current values with the values that have not been updated since 1935 or 1964. For this purpose, the so-called tax measurement number - a factor that is important for the calculation of the property tax - will be reduced considerably to about 1/10 of the previous value, i.e. from 0.35% to 0.031% for residential properties (one- and two-family houses, rented residential properties and condominiums) and 0.034% for non-residential properties (commercial properties, mixed-use properties, partial ownership, other developed properties). In addition, social housing and municipal and cooperative housing will continue to be supported via the property tax. Therefore, societies that make affordable housing possible will receive an additional discount in the tax rate by 25%, which will have a tax-reducing effect.
3. Step: Adjusting the assessment rates by the municipalities: If the property tax revenue in individual municipalities change because of the revaluation, there is the possibility for them to adjust their assessment rates and thus ensure that overall their property tax revenue does not change significantly.

The municipalities have announced that they will also do this - because in particular an increase in property tax on the occasion of the constitutionally required reorganization would not be politically mediable. The assessment rate will nevertheless also in the future essential municipal instrument for the amount of property tax.

* For reasons of clarity, the following explanations are limited to the explanation of the federal model.

Property Tax C

What is the new property tax C?

In addition to the property tax A (agricultural) for the real estate of forestry and agricultural enterprises and the property tax B (constructional) for developed and undeveloped land, partial ownership and heritable building rights, the introduction of the property tax C is to counteract the housing shortage especially in urban areas. In future, municipalities will be able to set a higher rate of assessment for land that is ready for development but undeveloped, if no development takes place on it. This so-called property tax C thus makes speculation more expensive and creates financial incentives to actually create housing on land ready for construction.

Can the property tax be deducted for tax purposes?

In the case of renting, the property tax is tax deductible; it is deducted in the tax return under 'income from renting and leasing' as part of the income-related expenses. Owners who use their property themselves cannot deduct the property tax. In the case of partial rental, the property tax can be deducted proportionately.

Who is required to submit a declaratory statement?

As the owner of a developed or undeveloped land or condominium, you must submit a declaration to determine the property tax value. In heritable building right cases, only the heritable building right holder or the heritable building right holder must submit a declaration.

By when and how to submit the declaration of determination?

The declaratory statement must be submitted digitally* to the competent tax office from July 1 until October 31, 2022. This is possible via the online tax office ELSTER (www.elster.de). If you already have a user account (e.g., for your income tax return), you can also use it for property tax; otherwise, you can already set it up now at www.elster.de. A digital submission can also be made via other software providers if necessary. The submission of receipts is not provided in principle.

* Only in individual cases (so-called hardship cases) - if the electronic transmission is economically or personally unreasonable for the taxpayer(s) - the submission in paper form is possible. This is particularly the case if the taxpayer does not have the necessary technical equipment, if the creation of the technical possibilities for data transmission would only be possible at considerable financial expense, or if the taxpayer, according to his or her individual knowledge, does not have the necessary technical equipment. the taxpayer according to his individual knowledge and skills is not or only limited in the ability to use the possibilities of remote data transmission.

Information tax office

Which tax office is responsible?

The responsible tax office is basically based on the location of your property and not on your possibly different residence.

Which information is required for the declaration of assessment?

As the owner of a residential property, you will receive an information letter with data available to the tax authorities, as well as information to assist in the preparation of the declaratory statement. You can transfer the data to the declaratory statement after checking for completeness and accuracy. This includes, among other things:

• File number
• Location of the property: street, house number, zip code and city
• Landmark(s) and parcel(s)
• Lot area
• standard land value
• type of land (eg. B. undeveloped plot or single-family house)
• Year of construction (only after 1949)
• Number of apartments and living space
• Number of garage / underground parking spaces (if any)

You can find this data, for example. For example, in the purchase contract or in the construction documents. To check for completeness and accuracy, use the property tax portal of the tax authorities.

For queries, the property tax hotline of your tax office is available, which you can find on the Internet on the website of your tax office. You can also find more information on the property tax reform at https://www.bundesfinanzministerium.de/Web/DE/Home/home.html

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