Meaning of Property Tax 3

How does the property tax work when there is a change of ownership?

If you do not buy your new property on the key date, January 1st, on which property tax is paid for the entire year, you are probably wondering whether you have to pay the relevant sum on a pro-rata basis?

The answer: no! The law clearly defines here that the owner of a plot of land or a property pays property tax on January 1st and then for the entire year. If you buy an object in May, for example, the debt in question is due by January 1st. compensated.

Often, however, the buyer and seller draw up a contract independently of the legal regulation in which the buyer reimburses the seller the corresponding amount on a pro-rata basis. This is expressly an individual agreement that is permitted but not required by law.

The property tax law

The real estate tax law has existed since August 7th, 1973 and was last changed on December 19, 2008. It is divided into six different sections, which deal, among other things, with the assessment of property tax and the determination and payment of property tax. The property tax law comprises a total of 46 paragraphs.

Is the property tax unconstitutional?

As mentioned earlier in this article, the amount of property tax varies within the federal states. The respective assessment rates vary between 340 and 900 percent. As a result, the current property tax calculation violates the so-called principle of equality . For this reason, the Federal Constitutional Court declared the current property tax calculation unconstitutional in April 2018. In addition, a reform of the property tax was initiated. The calculation of the property tax must be reorganized accordingly by December 31, 2019.

The property tax reform

The Federal Council has been drafting a law since 2016 for the re-evaluation of the value of buildings and land, which is intended to replace the standard value. So far, however, the Bundestag has not passed a resolution for a property tax reform. However, it is already clear that a separate tax return will be required to collect property tax. This means that an additional tax return must be submitted to the tax office. This will affect around 19 million households in Germany. The tax office will also be confronted with an increased workload.

Proposals for a property tax reform

The federal states have submitted a draft law to the Federal Council which is intended to reassess all land and real estate. The current average sales prices should serve as the basis for this. Bavaria and Hamburg, in which real estate prices have risen particularly sharply in recent years, are opposed to this proposal.

The southern states model was developed by the federal states of Hesse, Baden-W├╝rttemberg and Bavaria. The basis for assessment should be the number of square meters of the building and the property. Different types of use could be taken into account using different multipliers.

The taxpayers’ association ultimately recommends a simple model for calculating property tax without having to record the current value of all properties, as this would otherwise result in an expense that is difficult to estimate.

What consequences could a property tax reform have for property and land owners?

The plans of the federal states could mean a significant increase in property tax for the individual. On average, a 30-fold increase can be assumed. If you previously had to pay 500 euros annual property tax, this value would increase to an amount of 15,000 euros in the future. This would certainly also lead to an enormous increase in rents.

What are the consequences of this scenario?

  • In this case, the owners of single-family houses must expect increasing amounts. If a reform according to the country model were to prevail, numerous properties would be valued noticeably higher.
  • In the case of apartment buildings, a land tax would be advantageous because only the property on which the entire building is located would be subject to taxation. The tax amount would be shared among all residents or owners.
  • Residents of real estate in large cities must expect an increase in property tax. Especially in expensive regions such as Hamburg, Stuttgart or Munich, the real property prices no longer correspond to the current standard value. An adjustment would probably result in a strong increase in the unit value. Should the municipalities be prepared to forego the additional income, they could react with a lower assessment rate in this scenario.


Property tax is one of the oldest types of tax in Germany. The amount depends on many factors, including the value of the property in question. If you are interested in buying a house or apartment, it is important not to neglect this item in the course of your running costs.

However, you are not always “defenseless” when it comes to the tax authorities’ determinations. Among other things, you have the opportunity to object to a notification that has been sent. Whether this is ultimately granted, however, depends on several factors.

Due to the current reform of the property tax, many owners could benefit in the future. Because the unit value of a property, which is still current in the course of the corresponding calculations, is to be abolished in the future. Thus it would be possible to calculate the actual value of an object even more precisely (and fairer). If necessary, the said reform ultimately represents a special incentive for many prospective buyers to decide to buy a property.

Property Tax 3