Every person who owns a property in Germany has to pay property tax to the municipality. It does not matter whether the property is built on or not.
What is the property tax?
The amount of property tax relates to the property or the heritable building rights to a property. This means: the more a property is worth, the more property tax has to be paid as a rule.
All details that are important in this context are regulated by the property tax law.
This means, among other things, that the said sum is currently composed of the unit value (determined by the tax office), the property tax index and an individual assessment rate. Exceptions exist, among other things, with regard to listed objects.
Who has to pay all property tax?
The property tax is a tax that is a relic from the imperial era and represents a significant source of income for cities and communities. So they can look forward to around 14 billion euros in income from property tax every year. Incidentally, not only do owners of buildings and land have to pay the tax to the tax authorities, but 41 million tenants in this country are also affected because landlords are allowed to pass them on to them. As a result, almost every adult citizen in Germany has had to pay property tax, either directly or indirectly.
What is a property tax assessment?
The taxpayer is informed of the amount of the annual real estate tax to be paid in the so-called real estate tax assessment. In some cases, the sums concerned are also published by means of a notice in the Berlin Official Gazette.
For different reasons, an objection can be filed against the setting of the property tax or its amount. In this case, it is important that you keep in mind, among other things, as part of your letter:
- your name and address
- your address
- the number of the fee notice that has been sent
- the reason for your objection
indicate and sign the document. Contradictions of this kind are drawn up particularly frequently when property tax B is increased. However, whether the contradiction is finally recognized depends on further, individual factors.
The reform of the property tax in a nutshell – the new property tax
For a long period of time, property tax and the relevant legislation were discussed. Action is now to be taken with a reform and an associated legislative package. Because: until recently, the amount of property tax was calculated, among other things, on the basis of the so-called “unit value”. However, this was declared unconstitutional by the Federal Constitutional Court in spring 2018. Because on the basis of the aforementioned unit values it is not possible, among other things, to take into account the actual value development of the properties in question when calculating the tax.
Thus, one could currently speak of an important upheaval in connection with the setting of property tax. The federal states can optionally prepare different regulations until the end of December 2024. Until then, the “old law” still applies.
It remains to be seen whether the reform will ultimately be implemented nationwide or whether the individual regulations will differ from state to state.
What types of property taxes are there?
If you dig a little deeper into the different types of property tax, you will quickly see that tax law distinguishes between two subgroups. Some taxpayers pay property tax A, some property tax B, and some both. But what factors actually depend on which type of tax you have to pay?
What is the difference between property tax A and property tax B?
In the Federal Republic of Germany, around 35 million properties are subject to property tax . For the calculation, a distinction is made between built-up or buildable and agricultural areas that are not built on.
The property tax A is valid for those agricultural areas that property tax B , however, for developed land. As a rule, real estate tax B is higher than real estate tax A. The amount of real estate tax B can, in turn, vary widely depending on the type of development, whether it is a single-family house or a large apartment building. The location of the property is also decisive for calculating property tax.
Property tax A
Property tax A applies to forestry and agricultural businesses . On the basis of profitability, an economic value is calculated for such establishments and an apartment value is added for that part of the property that is used for residential purposes.
Property tax B
Property tax B applies to all properties that are not subject to property tax A. This also applies to undeveloped properties.
Examples of property tax B:
- Business and rental properties
- Part ownership
Accordingly, these land rights also apply as land.
The composition of the property tax
The calculation of property tax is very complex. In order to be able to calculate them correctly, various factors have to be considered. We would like to explain these to you in more detail in this section.