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The reform of the Property Tax Act of 2019 stipulates that from 1 January 2022 all 36 million properties located in Germany must be revalued for real estate tax purposes. As things stand, the tax returns are to be submitted to the (local) tax offices from July 2022. From 1 January 2025, the new valuation will be decisive for the amount of real estate tax.

Church legal entities are also affected by this reform and must revalue their properties. A reassessment will also be carried out for church-owned properties. Although the Property Tax Act provides for numerous exemptions, these do not cover all existing properties. In addition, depending on the type of use of the property, a property tax exemption may only apply to part of the property.

Property Tax Value: Re-declare every seven years

The reform is based on a value-based model of valuation. As in the previous system, a distinction is essentially made between residential properties, for which a typified capitalised income value is to be determined, and commercial properties or other developed properties, for which a simplified asset value method is applied. Property tax values must be re-declared every seven years. This could lead to an increase in property tax values, because both procedures use market-driven data bases, such as rent index, normal production costs and standard land values, which are currently rising.

At the same time, a change in the basic law grants the countries the right to deviate from the regulation of the federal (federal model) and to define their own rules (country models) within the framework of an opening clause. This table provides an overview of the models in each state:

Country Federal Model Country Model No trend
Baden-Württemberg x
Bavaria x
Berlin x
Brandenburg x
Bremen x
Hamburg x
Hessen x
Mecklenburg-Western Pomerania x
Lower Saxony x
North Rhine-Westphalia x
Rhineland-Palatinate x
Saarland Federal model with adjusted measurement figures
Saxony Federal model with adjusted measurement figures
Saxony-Anhalt x
Schleswig-Holstein x
Thuringia x

North Rhine-Westphalia has also decided to become the last state to be involved. The application of the federal model was announced in the press release of 06/05/2021 of the Ministry of Finance of the State of North Rhine-Westphalia.

Challenges for landowners

From the point of view of property owners, the reform - and, in the case of transnational locations, also the opening clause - will probably lead to a considerable administrative burden.

The key challenges in practice:

  1. Gross floor, living and usable areas according to the relevant DIN standard are required, which are not (yet) available.
  2. Standard land values are not available or not available for the relevant use.
  3. Construction years are not available or construction measures must be examined to determine whether they “significantly extend the overall economic useful life of the building” and thus the year of construction can be postponed.
  4. Current information on the current use of the properties is not available or is incomplete. However, any property tax exemption is dependent on this.
  5. Different valuation systems will have to be observed if properties are available in several federal states.

Specifically, the following applies:

  • Existing data must be regularly reviewed and updated with regard to the requirements of a reassessment.
  • It should be clarified in good time whether the revaluation is supported by the existing IT systems or whether the acquisition of a corresponding tool, e.g. for the preparation of the corresponding tax returns, is necessary.

We recommend that you deal with the real estate tax in the federal states relevant to you at an early stage and clarify your data situation. Our experts will be happy to assist you with this.