Property tax reform
What the 2022 property tax reform means for property owners
For property owners, the property tax reform will mean a significant increase in administrative work starting January 2022. At the latest, property owners will have to take action upon being asked to submit their assessment declaration(s).
Especially property owners who own many properties or properties in several federal states need to plan for the long term. Due to the high information requirements, a quick compilation of data is no longer easily possible. After receiving the request letter from the tax authorities, property owners only have one month to compile all the information and documents and submit the declaration of assessment to the relevant tax office.
What is property tax?
In Germany, property tax is levied on the ownership of land and on heritable building rights to land. This is borne by the owners, although it can and usually is passed on to the tenants. Property tax is a so-called municipal tax and, as the name already suggests, is levied by the municipalities and represents a significant source of income for them.
Why is there a property tax reform?
The property tax reform is the result of a decision made by the Federal Constitutional Court on April 10, 2018. The Federal Constitutional Court had declared the provisions of the Valuation Act on the standard valuation of real estate to be unconstitutional. In the press release issued by the Federal Constitutional Court, the decision is justified in particular by the legislator’s adherence to the main assessment period of 1964. The legislator was therefore requested to adopt a new regulation by December 31, 2019 at the latest. The legislator complied with this request with the federal model adopted at the end of 2019, which is to be applied nationwide.
What does the opening clause for property tax mean?
As no consensus could be reached in the discussions between the federal government and the federal states regarding the reorganization of the Property Tax Act, the federal states were given the option of adopting a rule that deviates from the federal model (so-called opening clause).
These federal states have introduced their own state models or are planning to do so:
- Baden-Wuerttemberg
- Bavaria
- Hamburg
- Hesse
- Lower Saxony
- Saxony
- Saarland
As a result, there will be a patchwork of different valuation models for determining property tax throughout Germany.
Property owners must provide this information on the property tax reform
The information that property owners must provide in the declaration of assessment depends in particular on whether the federal or the state model is applied. Elementary information when applying the federal model is:
- Property type,
- property area,
- standard land value,
- living or usable area / gross floor area,
- and the year of construction.
Online platform with all necessary property data planned
An online platform is being set up to provide landowners with the property data and valuation parameters they need to provide as part of the declaration of assessment. Relevant data from land registry offices and expert committees will be made digitally available there.
Does the property tax reform mean more work with the declaration?
For companies with a growing real estate portfolio, which in case of doubt also extends beyond the borders of a federal state, the preparation of the assessment declaration is likely to be more time-consuming in the future. The reason for this is the patchwork of different valuation models and the resulting different information requirements.
What deadlines are important for 2022 as part of the property tax reform?
Property owners must determine their property tax values as of the main assessment date. This is January 1, 2022. This applies to roughly 36 million properties as well as agricultural and forestry businesses in Germany.
The statutory deadline for submitting declarations of assessment is at least one month from the date of the request from the tax office.
UPDATE: As of today, property owners must submit their declarations of assessment by the end of January 2023. This applies regardless of the federal or state model.
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