Everyone who owns real estate in Germany has to file an additional tax return this year: the property tax return. Even businesses with real estate must submit a tax return. The background to this is the reform of the property tax that owners have to pay annually. Until now, the calculation of property tax has been based on outdated data, namely real estate values (so-called standard values “Einheitswerte”) from 1964 (previous West Germany) and 1935 (previous East Germany GDR). As is well known, property values have risen over the decades, in some regions much more than in others (Munich more than Görlitz). Unit value and actual value no longer match. For this reason, the Federal Constitutional Court called for a property tax reform.
New valuation for property tax reform
The values of all 36 million properties in Germany must now be recalculated. This will not only cause a lot of work for the tax offices, but also for the owners. Owners will have to provide special information about their properties, some of which they will have to obtain first. And there is not much time for this also so-called declaration of assessment: deadline is
October 31, 2022 31. January 2023. From January 2025, owners will then pay their property tax on the basis of the newly collected data.
Tax return via Elster desired
Fortunately, the tax offices of the federal states have already published the information they request from taxpayers. So property owners can already start gathering information at their leisure. If possible, the declaration should be submitted digitally. The corresponding form has already been activated for this purpose in the Elster tax program. In principle, it is also possible to submit the property tax declaration on a paper form. In Bavaria, property owners have the choice between digital and analog tax returns. In many states, however, you have to make a request and give reasons for your wish if you prefer the paper form. Good reasons would be, for example, that you do not have your own online access or are not very familiar with the Internet and digital communication. Anyone who wants to use the property tax return as an opportunity to switch to digital communication with the tax authorities should look for an Elster account as soon as possible. You can register on the Eltster portal with your tax identification number (see income tax certificate or income statement). In any case, the registration process takes a few days, because the tax authority sends the access data for the personal Elster account by mail for security reasons.
When a tax consultant makes sense
Tax consultants offer to handle property tax returns for their clients. The tax professional takes care of filling out the tax return and sending it electronically to the tax office. He can also assist in obtaining data and, for example, request missing information from the survey and land registry office on behalf of his clients. For tax consultants, however, the same deadline for the levy applies as for owners, and unfortunately the professional cannot bring about a saving on the subsequent property tax here. Entrusting a professional with the property tax return makes sense above all when the effort is particularly high, for example for property owners who own several dozen properties or in case you have commercial & residential properties all in one house. Owners who are only concerned with owner-occupied property or private landlords with a small number of properties need to consider whether they need help filling out the assessment declaration (Feststellungserklärung) – which is what the property tax declaration is called in official German. After all, the biggest effort in submitting the tax return is likely to be compiling the property data – and this is where the owners are challenged.
Three new tax models
The specific data required for the property tax return depends on the federal state in which the property is located. The federal states have not uniformly agreed on the model proposed by the federal government. Only eleven states follow the proposal; the rest have opted for alternative solutions. Roughly speaking, there will be three models.
The federal model
The federal government has proposed that the new market value of all real estate be determined on the basis of current land values, rental prices and the year of construction and type of building, among other factors. Eleven of 16 federal states have adopted this proposal, the so-called federal model – at least in essence. In the actual implementation of the revaluation, there are slight deviations in some states.
The area model and area-location model
In the area model, the benchmark for calculating property tax is not the value of the property, but rather the area of the land, building and living space alone. Bavaria uses this model. Hamburg, Hesse and Lower Saxony take a similar approach. Because in these states the location of the property plays a role in addition to the area, this is also referred to as the area-location model.
The land value model
Owners in Baden-Württemberg require the least data. Here, only the land area and the standard land value (“Bodenrichtwert”) are decisive for calculating the tax amount.
Which information is needed? And where to find them?
The file number (or the tax number for the property) can be found on the property tax assessment notice (from 2022 or earlier) for the property in question. Property owners receive this from the tax authorities once a year, on January 1. In the event of a change of ownership, the tax office sends the property tax notice to the new owner after the change in the land register. The file number is known to the tax office. In the written request for the property tax return, which some federal states send to all owners, this information may already be given.
Data from the land register
The land register excerpt contains the plot number, land register sheet and parcel classification. The ownership structure is also recorded here. This document is often enclosed with the purchase contract. If the land register excerpt is missing, it can be requested in writing from the land registry office or the district court for a fee of approximately 10 EUR. Usually, the document is delivered by mail within 5-10 business days. The local and court directory on the portal www.justiz.de lists the relevant office for each place in Germany (in the “Matter” search mask, select the keyword “Land register matters”). (=> Grundbuchsachen)
For a fee of 40EUR per property we can provide you the land register. Just let us know in the “contact us” form, so we can get back to you.
Standard land value (Bodenrichtwert)
The standard land value refers to the average value of land in a municipality. Within cities, the average value can vary depending on the location, which is why many areas are additionally divided into standard value zones. The standard land value is determined on the basis of actual real estate sales. The tax offices have access to all standard land values. It can therefore be assumed that the taxpayer does not have to obtain this value himself. For many regions, this data is publicly available via the standard land value information system (BORIS) www.bodenrichtwerte-boris.de. If owners do need to be active, links to the data they are looking for should be published on this portal.
Use of the property
In the use of real estate, a distinction is made between residential, commercial and mixed use. The single-family house and the apartment still fall under the residential form of use if premises are permanently used as a home office. A mixed-use property is one that includes both business and personal space. E.g. a tax office with direct access to the private part of the house.
It is good to have a living space calculation from the developer or architect. This information is also required in the property tax return. An architect’s floor plan showing the dimensions of the rooms is also helpful. If you do not have an official document showing the dimensions of your property, you will have to measure yourself. Based on the dimensions of all walls, the living space can be calculated. However, the task is not always easy, especially in the case of rooms with projections, i.e. rooms that are not exactly rectangular. It is particularly tricky with sloping roofs. Here, you have to follow the living space ordinance: The area up to a wall height of one meter is not taken into account. Everything between a ceiling height of one and two meters counts as half. Only from a clear height of two meters is the living space fully calculated. Balconies and terraces are to be considered with 25 percent. If the calculation is too laborious for you, you can get help from service providers on the Internet. Then you only need to measure the individual walls and no matter how many projections and angles the room has, the surveyors will calculate the correct living space from it. The service costs about 40 to 60 EUR. But beware: basement rooms, even if they are used as living space, attics and laundry basements do not count as living space. If the property tax return asks for usable floor space, you do not need to declare these rooms. This is because the legislator understands usable space to mean sales rooms or workshops.
A distinction is made between multi-family houses, one-family houses and two-family houses. Two-family houses are designed for the use of two families – for example, one lives on the upper floor, the other on the first floor, they share the house entrance, and often also the garden. A special form of the two-family house is the house with a granny apartment (Einliegerwohnung). The typical terraced house and the semi-detached house are considered single-family houses.
Number of apartments and plot size
If you own property in an apartment building, you will also be asked for the number of apartments and your share of the total size of the house and property. Attention: Does your residential complex and your community of owners extend over several apartment buildings? In this case, the total number of residential units in all houses that are located on the common property is decisive for the property tax declaration. In the case of larger residential complexes, a look at the declaration of partition will show how many apartments there are. The property manager will also be able to help here. The area of the property can be found in the land register and is expressed in hectares (abbreviation: ha), ares (abbreviation a) and square meters (sqm). One hectare is 10,000 square meters. One ar is 100 sqm. Example: 16 a 50 sqm are 1,650 sqm. One’s own share in the property can also be found in the declaration of division.
Parking spot and garage
When asked about the parking place for the car, it can be a garage, a carport or a parking space. For the purposes of the property tax declaration, carport and parking space are the same. In apartment buildings, the parking space only has to be declared if it is clearly assigned to one’s own residential unit by land register or declaration of partition as a special use area or special property. A parking space in a large courtyard, for example, in which everyone parks their car wherever something is free, does not count as a parking space.
Year of construction
The year of construction is decisive for determining the value of a property. The younger the building, the more it is worth – and the higher the property tax due later. The year of construction usually corresponds to the first entry in the land register. If the property was renovated, the date of renovation is the year of construction. A core renovation is when the building has been restored to the condition of a new building through extensive measures. However, this requires numerous measures to be carried out almost simultaneously, including a new roof including insulation, a new facade including insulation, new bathrooms, new floors, new windows, and new heating. If comparable measures were carried out one after the other over many years, by definition there is no core renovation.
Net cold rent
The value of a property also depends how much rent the owner can earn. The states, which follow the federal model and determine the new property tax on the basis of the property value, therefore ask for the net cold rent (Nettokaltmiete). This is not problematic for landlords; the only thing to note here is that the cut-off date for the rent amount is Jan. 1, 2022. Later rent increases are not taken into account. Owner-occupiers must specify a fictitious net cold rent. This is not a matter of a rule of thumb; the values (depending on the type of property, living space and year of construction of the property) for the individual federal states can be found in the Valuation Act (BewG) for real estate: Annex 39 to Section 249 BewG. https://www.gesetze-im-internet.de/bewg/anlage_39.html
Who can help?
The tax offices of the various federal states are responsible for property tax returns. Owners can find more detailed information on the online portals of the respective authorities. Anyone who has submitted the property tax return should continue to archive the documents relating to the required information well. Not only for possible inquiries from the tax official – in most federal states a new property tax return will be due every seven years in the future.
How the new property tax is calculated
In simple terms, the property tax is calculated on the basis of three factors: the property evaluation, the tax rate and the collection rate.
Evaluation of the property
With the reform of the land tax, real estate in Germany is revalued. This results in an individual property tax value for each property (also known as unified value = Einheitswert). At the state level, the following applies: two properties of equal value receive the same property tax value, since they were valued using the same property tax model. Based on the property tax value, properties with the same value can basically be treated equally for tax purposes.
The property tax value is first multiplied by a tax rate. The tax authorities use the tax rate to differentiate according to the type of building. The property of a commercial business receives a higher tax rate than a residential building. Businesses therefore pay more property tax than owners of residential buildings. There are also discounts for monuments and social housing, they are taxed at a lower rate. After the property tax reform, the tax rate for residential buildings is 0.031% nationwide. The result of the first step of the calculation (property tax value x tax rate) is the property tax assessment amount.
Theoretically, the amount of the real estate tax could already be set at the real estate tax assessment amount. Then all real estates of the same value in a federal state would be taxed at the same rate. (Differences in taxation would only result from the different calculation models of the federal states). But the Real Estate Tax Act provides that individual municipalities and communities are free to decide on the final tax amount. For this purpose, there is the so-called property tax assessment rate, a factor that each municipality sets individually and thus determines the amount of property tax. The level at which the assessment rate is chosen depends on the financial needs of the individual municipalities. This is because property tax is one of the most important sources of revenue for municipalities. The amount of the levy that property owners have to pay as property tax is calculated by multiplying the property tax assessment amount by the municipality’s assessment rate.