GRUNDSTEUERREFORM / PROPERTY TAX 2022: THIS IS WHAT YOU NEED TO DO NOW
This year, the property tax return is an additional tax form that must be submitted by every German property owner. Even companies that own real estate are required to file a tax return. The annual property tax that owners are required to pay has been changed, which is the basis for this. Property taxes had previously been calculated using out-of-date information, namely real estate values (also known as "standard values," or "Einheitswerte") from 1935 and 1964 (formerly, West Germany) (previous East Germany GDR). Property values have increased over the years, as is well known, but in some areas much more so than in others (Munich more so than Görlitz). The actual value no longer corresponds to the unit value. The Federal Constitutional Court urged reform of property taxes as a result.
New Valuation For Property Tax Reform
It is now necessary to recalculate the values of all 36 million properties in Germany. This will be quite time-consuming for both the owners and the tax agencies. Special information about their properties will need to be provided by the owners, some of which they will need to acquire first. The deadline for this so-called declaration of assessment is January 31, 2023, which is only a short amount of time before the deadline of October 31, 2022. Owners will then pay their property tax based on the newly gathered information starting in January 2025.
Tax Return Via Elster Desired
Fortunately, the data that the federal states' tax offices ask citizens for has already been made public. Property owners can now begin their independent research. The declaration shall be filed electronically, if practicable. In the Elster tax programme, the necessary form has already been turned on for this use. The property tax declaration may, in theory, also be submitted on paper. Property owners in Bavaria can choose between filing digital or analogue tax returns. However, if you prefer the paper form, you must request it and specify why you want it in many states.
Having no online access or having little experience with the Internet and digital communication are both valid excuses. Find an Elster account as soon as you can if you wish to utilise the property tax return as an opportunity to move to digital communication with the tax authorities. You can use your tax ID number to sign up on the Eltster website (see income tax certificate or income statement). In any case, the registration process takes a few days since, for security reasons, the tax office mails the personal Elster account access information.
When A Tax Consultant Makes Sense
Property tax returns are handled for customers by tax consultants. Filling out the tax return and transmitting it electronically to the tax office are handled by the tax expert. He can also help with data collection by, for instance, asking the survey and land registry office for any missing data on his client's behalf. Tax consultants, however, are subject to the same levy deadline as owners, therefore they are unable to influence this situation to reduce the eventual property tax. When the effort is particularly high, such as for property owners who own several dozen properties or when you have commercial and residential properties together in one house, it makes sense to entrust a professional with the property tax return.
Owners who are simply concerned with owner-occupied properties or private landlords with a limited number of properties must decide if they require assistance in completing the assessment declaration (Feststellungserklärung), which is the official German name for the property tax declaration. After all, gathering the property data is likely to take the most time and effort when submitting the tax return, and this is where the owners face difficulties.
Three New Tax Models
Depending on the federal state in which the property is located, different information is needed for the property tax return. The federal government's suggested model has not received unanimous support among the federal states. Only eleven states adhere to the proposal; the others have chosen different approaches. There will essentially be three models.
The federal model
The federal government has suggested that the new market value of all real estate be established using a variety of criteria, including current land values, rental rates, the year and kind of construction, and other variables. This idea, the so-called federal model, has at least been accepted by eleven of the sixteen federal states. There are minor variations in some states' real revaluation implementation.
The area model and area-location model
The area of the land, buildings and living space alone serves as the benchmark for computing property tax under the area model rather than its market worth. This model is used in Bavaria. The approaches are similar in Hamburg, Hesse, and Lower Saxony. This is also known as the area-location model because in these states the property's location matters as well as the surrounding area.
The land value model
Baden-Württemberg owners need the least amount of information. The sole factors that determine the tax amount, in this case, are the land area and the standard land value (Bodenrichtwert).
Which Information Is Needed? And Where To Find Them?
File number
The property tax assessment notice (from 2022 or before) for the subject property contains the file number (or the tax number for the property). Once a year, on January 1, the taxing authorities send this to property owners. After a change in ownership is recorded in the land register, the tax office notifies the new owner of the property tax due. The tax office is aware of the filing number. This information might already be included in the written request for the property tax return that some federal states send to all owners.
Data from the land register
The plot number, land register page, and parcel classification are all included in the land register excerpt. Here, the ownership hierarchy is also documented. The purchase contract frequently includes this document. If the land register excerpt is missing, it may be obtained in writing for a charge of about 10 EUR from the district court or the property registry office. The paperwork typically arrives via mail in 5 to 10 business days. The appropriate office for each location in Germany is listed in the local and court directory on the website www.justiz.de (in the "Matter" search mask, enter the phrase "Land register matters"). Fundamental Books
We can give you access to the land register for a fee of 40 EUR per property.
Standard land value (Bodenrichtwert)
The average cost of land in a municipality is referred to as the standard land value. Because the average value within cities might differ based on the location, many locations are further separated into standard value zones. Real estate sales data is used to calculate the standard land value. All conventional land valuations are available to the tax offices. Therefore, it might be assumed that the taxpayer is not required to acquire this value on their own. The standard land value information system (BORIS) at www.bodenrichtwerte-boris.de makes this information accessible to the general public for various regions. Links to the information they're looking for should be posted on this portal if owners do need to be active.
Use of the property
There are three types of real estate uses: residential, commercial, and mixed-use. If the property is continuously used as a home office, both the single-family home and the apartment still fall under the residential form of use. A mixed-use property has both commercial and residential areas. For instance, a tax office with direct access to the home's interior.
Living space
A living space estimation from the developer or architect is a good idea. The property tax return also has to include this information. Also useful is a floor plan drawn by an architect that shows the room sizes. You will need to measure yourself if you don't have a formal document with your property's measurements. The amount of living space can be calculated using the measurements of all the walls. The task is not always simple, especially when dealing with projections, or non-exactly rectangular, rooms. Sloping roofs present particular challenges.
You must abide by the living space ordinance in this area: One-metre-high walls are not considered, nor is the space up to them. Half of anything is considered anywhere between a ceiling height of one and two metres. The living space can only be computed in its entirety from a clear height of two metres. Terraces and balconies should receive 25% of the weight. If you find the computation to be too difficult, you can use the Internet to contact service providers for assistance. Afterwards, you only need to measure each wall individually, and the surveyors will use that information to determine the correct living space regardless of how many projections and angles the room has. Costs for the service range from 40 to 60 EUR.
However, take note that living space does not include laundry basements, attics, or basement rooms used for storage, even if they are used as such. You do not need to list these rooms if the usable floor space question on the property tax return is not present. This is due to the legislator's understanding that usable space refers to shops or sales rooms.
Building type
There is a contrast between single-family homes, two-family homes, and multi-family homes. Two families can live in two-family homes; for instance, one family might live on the second floor and the other on the first, with both families sharing the front door and frequently the backyard. The two-family home with a granny apartment is a unique variant. Single-family homes are defined as semi-detached and typical terraced homes.
Number of apartments and plot size
If you own property in an apartment complex, you will also be questioned about the number of apartments and your proportion of the property's overall size. Attention: Do your neighbourhood and your group of property owners encompass multiple apartment buildings? In this instance, the property tax declaration is determined by the total number of residential units in all homes situated on the common land. The number of flats in bigger residential complexes can be determined by looking at the declaration of partition. Also helpful in this situation will be the property manager. The land record lists the area of the property in hectares (abbreviated ha), ares (abbreviated a), and square metres (sqm). 10,000 square metres make up one hectare. 100 sqm is one ar. For instance, 16 x 50 = 1,650 sqm. The declaration of division also specifies one's share of the property.
Parking spot and garage
A garage, a carport, or a parking area might all be mentioned when asked where the automobile would be parked. The parking spot and carport are the same for the property tax declaration. Only if the parking space is designated by the land register or a declaration of partition as a special use area or special property must it be declared in apartment buildings. The term "parking space" does not apply, for example, to a huge courtyard where cars are parked wherever there is space.
Year of construction
The value of a property is largely influenced by the year it was built. The value of a structure increases with age, which also raises the amount of future property taxes owed. The first entry in the land record often corresponds to the year of construction. If the property undergoing renovation, the year of construction serves as the date of the renovation. A major renovation is when a structure has undergone extensive work to be returned to its brand-new state. But to accomplish this, several actions must be taken almost simultaneously, including installing a new roof with insulation, a new facade with insulation, as well as new floors, windows, and heating. There cannot be a core refurbishment if similar actions were taken one after another over a long period.
Net cold rent
The amount of rent the owner can collect also affects a property's value. Therefore, the states want the net cold rent since they follow the federal model and base the new property tax on the value of the property (Nettokaltmiete). The only thing to keep in mind is that the cutoff date for the rent amount is January 1, 2022, which poses no problems for landlords. Future rent hikes are not considered. The fictitious net cold rent must be specified by owner-occupants.
Who can help?
Property tax returns are handled by the tax offices of several federal states. On the websites of the relevant authorities, owners can obtain more comprehensive information. Anyone who has already submitted a property tax return should keep all of the supporting documentation safe and sound. In the future, a new property tax return will be required in most federal states every seven years, not just for potential tax official inquiries.
How The New Property Tax Is Calculated
Three variables—the property assessment, the tax rate, and the collection rate—are used to determine the property tax.
Evaluation of the property
German real estate is valued differently as a result of the land tax reform. As a result, each property receives a unique property tax value, often known as a unified value (German: Einheitswert). The following holds at the state level: since two properties of equivalent value were valued using the same property tax model, they receive the same property tax value. Properties with the same value may be regarded similarly for tax reasons based on the property tax value.
Tax rate
First, a tax rate is multiplied by the assessed value of the property. The taxing authorities make distinctions based on the type of construction using the tax rate. A commercial building's property is taxed at a greater rate than a residential structure. As a result, business owners pay more property taxes than owners of homes. Additionally, social housing and monuments receive discounts and pay lower taxes. Following the property tax reform, the countrywide residential building tax rate is now 0.031%. The property tax assessment amount is the outcome of the first phase of the computation (property tax value x tax rate).
Collection rate
The real estate tax might theoretically already be set at the assessed value of the property. In that case, a federal state would impose a uniform tax rate on all real estate of equal value. (Differences in taxation would only arise from the various federal state calculating schemes.) However, the Real Estate Tax Act stipulates that each municipality and community is free to choose the precise tax rate. The amount of property tax is established by each municipality individually and is used for this purpose as the so-called property tax assessment rate.
The level of the assessment rate is determined by the various municipalities' financial needs. This is because one of the most significant sources of income for municipalities is property tax. By dividing the amount of the property tax assessment by the municipality's assessment rate, the amount of the levy that property owners must pay as property tax is determined.
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