Property owners pay tax (Grundsteuer) on their owned property once per year. The tax is collected from cities, municipalities, and communities and is calculated according to the property and building value. This tax also has an effect on rental tenants due to the property tax affecting the operating costs (Betriebskosten) and thus, also a part of the rental price.
The current property tax rates are based on values that date back to 1964 in old federal states and 1935 in new federal states. The standard values have changed only minimally and selectively since then, such as when there are significant increases or decreases in value or when there is a change of owners. Usually, the local tax office for these properties still uses the previous standard value when calculating property tax.
It’s no big surprise that the Federal Constitutional Court initiated a property tax reform in 2018 as the standard value has long since ceased to correspond to today’s modern property values.This ensures that property tax is based on its current worth leading to a more fair and simpler valuation process.
The property tax reform introduces new assessment bases for each of the approximately 36 million economic units for property tax purposes from the calendar year 2025 onwards.
The previous procedure for determining property tax will remain:
Property tax value x Basic federal rate x Assessment rate
Property tax value (Grundsteuerwert): Determined by the tax office based on a property tax return (Grundsteuererklärung)Basic federal rate (Steuermesszahl): Determined by lawAssessment rate (Hebesatz): Determined by the respective city or municipality
New property tax values are to be determined for properties owned as of or before January 1st, 2022, these values will be the basis for the new property tax implemented in 2025.
The following information is required for residential properties:
- Property location
- Property area
- Standard ground value (Bodenrichtwert)
- Building type
- Living space area
- Year of construction
Property owners who owned their property as of or before January 1st, 2022, must submit this information to their local tax office in the form of a property tax return.
