The deadline for filing property tax returns is coming to an end. Many real estate owners express frustration. Also because they don’t know exactly how much they will have to pull the trigger from 2025. An essential factor in the calculation of the property tax is the assessment rate of the municipalities. And contrary to previous assumptions, it is apparently going up.
Should anyone claim that Germany is a service desert. Since July 1, the owners of around 36 million developed and undeveloped properties have been helping to provide the tax authorities with up-to-date data on their properties. This should end on January 31st. End of story, nothing to add.
There will be no thank you, and certainly no discount for the friendly help. A few weeks after submitting the declaration of assessment, however, the notifications about the property tax value and the property tax amount will arrive at home. The tax office usually sends both in one letter.
If you then want to know how much more or less property tax you will have to pay annually from 2025, you have to multiply. Namely the real estate tax amount with the real estate tax assessment rate of the city or municipality in which the property is located.
For a homeowner in Munich, whose notice shows a property tax amount of 91 euros, for example, with a property tax assessment rate of 535 percent, this means 487 euros in property tax annually in the future. The bill is: 91 euros times 5.35.
In the next step, it is the municipalities that turn the property tax screws with their respective assessment rates. It depends on what the individual has to shell out in the future. The property tax is a classic municipal tax and is used to finance local tasks.
“The German cities and municipalities achieve around 15 billion euros a year from the property tax,” says the deputy general manager of the German Association of Towns and Municipalities, Uwe Zimmermann, to FOCUS online. “This shows that the property tax is indispensable for them, especially in view of the wide range of tasks.”
These include all services of general interest, such as registration and passports, sewage disposal, road construction or the construction or maintenance of schools. Sometimes there is a library or a swimming pool on top.
The municipalities are not financially on a bed of roses. Or as Uwe Zimmermann puts it: “The situation of municipal budgets is very tense overall, apart from a few exceptions.” In this respect, the question arises as to whether the municipalities could possibly use the property tax reform demanded by the Federal Constitutional Court due to completely outdated standard values and finally implemented by the Bundestag to earn a few more euros.
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“The new property tax will result in an additional burden across the board – above all due to adjusted assessment rates,” says Hans Reinold Horst, state chairman of the Haus owners’ association
Because: “In my opinion, the assessment rates will go up rather than down due to the tight coffers of the cities and municipalities, even if the law provides for ‘revenue neutrality’,” explains Horst in an interview with FOCUS online. For him it is clear: “There has never been a tax reform where the state would not have counted on being rich.”
Property tax applies to households and businesses. There are two types of property tax rates for private individuals: A for agricultural and forestry land, B for other land. The amount is determined by the respective city or municipality based on the communal right of self-determination according to its own taste. It is between 0 and 1050 (Lorch and Lautertal) percent and is valid for one calendar year.
According to the evaluation by the consulting agency Ernst
Wind turbines or the income generated from them are usually the reason why the mayors forego income from property tax. Simply because these few municipalities are not dependent on it.
The large FOCUS Online guide answers all important questions about the subject of property tax reform on 19 pages.
However, these are exceptions. According to EY, the average property tax rate at the time of the survey was 386 percent in Germany. No exceptions are numerous “individual cases” of real estate owners from several federal states, where the property tax assessment is already available to the owner and who have reported to FOCUS online.
In these cases, the assessment rate would have to drop dramatically so that the property tax would not be several hundred percent higher from 2025 onwards. According to an initial evaluation, property owners in Baden-Württemberg with large properties are particularly affected, but also in Berlin and Saxony.
But it is also true that the property tax reform in Bavaria, Hamburg and large parts of Hesse, for example, has relatively little impact on the future amount, according to initial evaluations. These differences have nothing to do with the assessment rates, but are related, among other things, to the fact that there will not be one property tax law in the Federal Republic of Germany in the future, but rather several.
For example, nine federal states have opted for the federal model for property tax B. These include:
Two states will have a modified federal model in use from 2025:
Five federal states are starting with their own models:
“In Lower Saxony itself I am not aware of any extreme property tax cases with expected increases of several 100 percent. Here, as in some other federal states, these excesses are not to be expected due to our area-location model,” emphasizes Hans Reinold Horst from Haus und Grund.
“Land standard value models, such as in Baden-Württemberg, are based on the value of building land, without properties being actually building land despite their size and being able to be used accordingly,” says Horst, classifying the situation in south-west Germany.
“On average, the property tax burden in Germany is just under 180 euros a year,” reports Uwe Zimmermann from the Association of Towns and Municipalities. Currently. On average, it should stay that way.
“Political requirements state that property tax should be revenue-neutral from 2025,” Zimmermann clarifies. “That means that the cities and municipalities are not taking in more than before.” But: “Due to municipal self-determination, this is not legally binding.”
All the relevant experts have actually agreed so far that, because the market values have risen extremely over the past few decades, not only the property tax index is reduced, but also the assessment rate. So that there are no drastic increases in property tax, where instead of 400 euros, 2500 euros and more are suddenly called.
Now the German Association of Towns and Municipalities says: “The assessment rates will have to be increased in order to maintain the status quo,” as Uwe Zimmermann emphasizes. “This has to do with the fact that the tax base amounts are falling overall due to the reduced tax base number.” Blessed is the one for whom this is actually the case.
Zimmermann, however, states: “There will be postponements in 2025. Some will pay more, others less or the same amount of real estate tax.” Of course, there could also be a significant increase for some property owners. “But the bottom line is that the revenue for the municipalities will be the same,” he clarifies. “There is a political commitment to that.”
But what if the tax base increases despite a reduced tax base number – from 0.35 percent to 0.34 per thousand or 0.31 per thousand – and the assessment rates as well?
“The property tax system is complex overall and the devil is often in the details,” Gregor Kirchhof told FOCUS online. Kirchhof holds the chair for public law, financial law and tax law at the University of Augsburg, where he is also director of the institute for business and tax law.
“A lot of people have to submit a property tax return and are upset about the new law,” he knows from many conversations. For him there is no question anyway: “The property tax model of the federal government is unconstitutional and far too complicated.”
It will be two years before the new law comes into force. But as early as 2022, many municipalities have raised the property tax rates significantly, and many more have planned this for 2023. “The current increases in property tax rates are not a reaction to the property tax reform,” Gregor Kirchhof clarifies. “These are normal tax increases.” Cold consolation for those affected.
