FINVIA
FINVIA
Podcast
27.4.2022
Property tax is the oldest tax in the world. In Germany, it is levied by the municipalities, which in turn rely on tax assessments by the tax offices. These valuations were last carried out in the old federal states in 1964 and in the new federal states in 1935. On April 10, 2018, the Federal Constitutional Court ruled that these values no longer comply with the principle of equality. The reform of the property tax provides for a tax revaluation on 01.01.2022.
Elena Reuter, Head of Real Estate at FINVIA, talks about the new obligations for owners in an interview with tax consultant Patrick Bernd Findeis, Tax Partner at BDO in Frankfurt and property tax expert.
Property tax is levied on real estate (developed and undeveloped land) and on agricultural and forestry businesses. Extensive new regulations came into force for both asset groups on 01.01.2022.
The new regulation applies comprehensively to all real estate. This includes family homes and owner-occupied properties. Declaration obligations also apply here.
Property owners will be affected by the new regulations on several levels. Property owners must actively submit a property tax return for their properties by 31.10.2022. The tax return must be submitted separately for each property. Detailed information on the property, the building and its use must be provided in the tax return. Please note that the tax authorities will only accept tax returns from 01.07.2022 - this means that property owners will have to pore over their tax returns during the beautiful summer months. The cut-off date for the attribution and status of properties is 01.01.2022 - whoever owned the property at that time must submit the tax return and the information as the property was on 01.01.2022. Property owners will be passively affected by the new property tax from 01.01.2025. Nobody can say how high this will be, as the municipalities can set the property tax rates themselves.
It is important to get an overview of the property, collect information and then prepare this information systematically. The first port of call should be the current assessment value or property tax assessment notices; a lot of important information can be found here, such as the file number and the responsible tax office. Then ask about the location of the property. If the property is located in Bavaria, Hamburg, Hesse or Lower Saxony, the floor space, living space and usable space must be determined. Ideally, the tax office should request this information from reliable documents such as building plans, purchase/rental contracts or insurance and financing documents. In Baden-Württemberg, however, only the floor space and the percentage of use for residential purposes is important. In all other federal states, the development and use must be recorded in great detail.
No. A separate tax return must be submitted for each individual economic unit, which is the technical tax term. Economic units in the same city that belong to the same owner must also be declared individually.
As always in detail. The legislator has opted for a valuation model at federal level that can be amended in whole or in part by state law. The states of Baden-Württemberg, Bavaria, Hamburg, Hesse and Lower Saxony have made use of this option. In the aforementioned federal states, only the size of the property, the living space and the usable area have to be assessed. Depending on state law, tax reductions can be claimed for certain forms of residential use or for monuments. In the federal model, complex considerations are applied to the type of use and development; a lot of information has to be compiled and processed here.
Another stumbling block is the obligation to submit a tax return. There are three different cases here: (a) if the property is leased, (b) if there is a heritable building right on the property or (c) neither. In case (a), the lessor must submit the property tax return; if the lessee has erected buildings, he must provide the lessor with the necessary information. In case (b), the leaseholder must submit the property tax return; the leaseholder must provide the necessary information. In case (c), the standard case, the tax return must be submitted by the person to whom the property was attributable on 01.01.2022.
Unfortunately, this area follows its own, but fortunately clear rules. If an apartment building is divided into condominiums, a separate tax return must be submitted for each condominium. This also applies if several or all condominiums in the same building belong to the same owner. If the property is divided according to the Condominium Act, there are condominiums and require a so-called individual declaration. If the apartment building is not divided, a declaration must be submitted for the entire building.
Mixed use is the rule rather than the exception, especially in central locations of conurbations. Houses with apartments and commercial use (e.g. supermarket or kiosk on the first floor, doctor's surgery, tax offices, offices, etc.) must be examined closely. If the commercial use is 20% or more, it is a mixed-use property that must be assessed using the asset value method. The degree of use is determined by the proportion of floor space - areas of commercially used ancillary rooms (e.g. cellars) count as commercial use, whereas areas of ancillary rooms to apartments (e.g. laundry rooms, cellars, attics) do not count as living space. In some cases, just a few square meters determine the legal classification of the building. In the case of a mixed-use building, the so-called asset value method is applied. In contrast to the income capitalization approach, which applies to multi-family houses, other rules apply to determine the areas.
The obligation to declare applies to the owner on the cut-off date 01.01.2022, regardless of whether I have bought or sold a property in 2022. In the case of acquisitions, I advise you to check very carefully whether the property tax value has been well explained by the seller. If in doubt, have an expert look it over and apply for an error-correcting change to the assessment to the next 01.01. In acquisition cases, I strongly advise you to hand over all (old) construction documents. Extensive renovations in previous years in particular (keyword: core renovation) are tax-relevant.
Unfortunately not. A so-called main assessment must be carried out every seven years; here, all property owners must (re)declare the current circumstances. Irrespective of this, the owner has a duty of disclosure. The tax office must be notified of any changes to tax-relevant facts such as types of use, areas (additions) or reclassifications. The tax office then examines the effects and issues new notices if necessary.
The tax authorities' deadlines are tight and the required information has to be collected from various sources, some of which are difficult to obtain. The order of the day is to waste no time and actively tackle the task. With around 40 million tax returns to be filed throughout Germany, helpers and public authorities will have a lot to do - so you should be at the front of the queue. Talk to your tax advisor if you have any questions!
The tax authorities have indicated that deadline extensions will only be granted in well-founded individual cases and only in relation to individual properties. Property owners who commission a tax advisor will also not receive automatic deadline extensions.
A word about the tax returns themselves: they must be submitted electronically via the tax authorities' ELSTER portal. If you want to submit your tax returns yourself, you should register here promptly and quickly.
Note: In a joint webinar, Patrick Bernd Findeis and Elena Reuter discuss the topic of property tax in detail: Watch the video
FINVIA
27.4.2022
Elena Reuter
The 2022 property tax reform will bring many changes. The new regulations will apply from 2025, but land and property owners need to take action now. Tax consultant Patrick Bernd Findeis reveals facts & tips on the new property tax in an interview with Elena Reuter.
Property tax is the oldest tax in the world. In Germany, it is levied by the municipalities, which in turn rely on tax assessments by the tax offices. These valuations were last carried out in the old federal states in 1964 and in the new federal states in 1935. On April 10, 2018, the Federal Constitutional Court ruled that these values no longer comply with the principle of equality. The reform of the property tax provides for a tax revaluation on 01.01.2022.
Elena Reuter, Head of Real Estate at FINVIA, talks about the new obligations for owners in an interview with tax consultant Patrick Bernd Findeis, Tax Partner at BDO in Frankfurt and property tax expert.
Property tax is levied on real estate (developed and undeveloped land) and on agricultural and forestry businesses. Extensive new regulations came into force for both asset groups on 01.01.2022.
The new regulation applies comprehensively to all real estate. This includes family homes and owner-occupied properties. Declaration obligations also apply here.
Property owners will be affected by the new regulations on several levels. Property owners must actively submit a property tax return for their properties by 31.10.2022. The tax return must be submitted separately for each property. Detailed information on the property, the building and its use must be provided in the tax return. Please note that the tax authorities will only accept tax returns from 01.07.2022 - this means that property owners will have to pore over their tax returns during the beautiful summer months. The cut-off date for the attribution and status of properties is 01.01.2022 - whoever owned the property at that time must submit the tax return and the information as the property was on 01.01.2022. Property owners will be passively affected by the new property tax from 01.01.2025. Nobody can say how high this will be, as the municipalities can set the property tax rates themselves.
It is important to get an overview of the property, collect information and then prepare this information systematically. The first port of call should be the current assessment value or property tax assessment notices; a lot of important information can be found here, such as the file number and the responsible tax office. Then ask about the location of the property. If the property is located in Bavaria, Hamburg, Hesse or Lower Saxony, the floor space, living space and usable space must be determined. Ideally, the tax office should request this information from reliable documents such as building plans, purchase/rental contracts or insurance and financing documents. In Baden-Württemberg, however, only the floor space and the percentage of use for residential purposes is important. In all other federal states, the development and use must be recorded in great detail.
No. A separate tax return must be submitted for each individual economic unit, which is the technical tax term. Economic units in the same city that belong to the same owner must also be declared individually.
As always in detail. The legislator has opted for a valuation model at federal level that can be amended in whole or in part by state law. The states of Baden-Württemberg, Bavaria, Hamburg, Hesse and Lower Saxony have made use of this option. In the aforementioned federal states, only the size of the property, the living space and the usable area have to be assessed. Depending on state law, tax reductions can be claimed for certain forms of residential use or for monuments. In the federal model, complex considerations are applied to the type of use and development; a lot of information has to be compiled and processed here.
Another stumbling block is the obligation to submit a tax return. There are three different cases here: (a) if the property is leased, (b) if there is a heritable building right on the property or (c) neither. In case (a), the lessor must submit the property tax return; if the lessee has erected buildings, he must provide the lessor with the necessary information. In case (b), the leaseholder must submit the property tax return; the leaseholder must provide the necessary information. In case (c), the standard case, the tax return must be submitted by the person to whom the property was attributable on 01.01.2022.
Unfortunately, this area follows its own, but fortunately clear rules. If an apartment building is divided into condominiums, a separate tax return must be submitted for each condominium. This also applies if several or all condominiums in the same building belong to the same owner. If the property is divided according to the Condominium Act, there are condominiums and require a so-called individual declaration. If the apartment building is not divided, a declaration must be submitted for the entire building.
Mixed use is the rule rather than the exception, especially in central locations of conurbations. Houses with apartments and commercial use (e.g. supermarket or kiosk on the first floor, doctor's surgery, tax offices, offices, etc.) must be examined closely. If the commercial use is 20% or more, it is a mixed-use property that must be assessed using the asset value method. The degree of use is determined by the proportion of floor space - areas of commercially used ancillary rooms (e.g. cellars) count as commercial use, whereas areas of ancillary rooms to apartments (e.g. laundry rooms, cellars, attics) do not count as living space. In some cases, just a few square meters determine the legal classification of the building. In the case of a mixed-use building, the so-called asset value method is applied. In contrast to the income capitalization approach, which applies to multi-family houses, other rules apply to determine the areas.
The obligation to declare applies to the owner on the cut-off date 01.01.2022, regardless of whether I have bought or sold a property in 2022. In the case of acquisitions, I advise you to check very carefully whether the property tax value has been well explained by the seller. If in doubt, have an expert look it over and apply for an error-correcting change to the assessment to the next 01.01. In acquisition cases, I strongly advise you to hand over all (old) construction documents. Extensive renovations in previous years in particular (keyword: core renovation) are tax-relevant.
Unfortunately not. A so-called main assessment must be carried out every seven years; here, all property owners must (re)declare the current circumstances. Irrespective of this, the owner has a duty of disclosure. The tax office must be notified of any changes to tax-relevant facts such as types of use, areas (additions) or reclassifications. The tax office then examines the effects and issues new notices if necessary.
The tax authorities' deadlines are tight and the required information has to be collected from various sources, some of which are difficult to obtain. The order of the day is to waste no time and actively tackle the task. With around 40 million tax returns to be filed throughout Germany, helpers and public authorities will have a lot to do - so you should be at the front of the queue. Talk to your tax advisor if you have any questions!
The tax authorities have indicated that deadline extensions will only be granted in well-founded individual cases and only in relation to individual properties. Property owners who commission a tax advisor will also not receive automatic deadline extensions.
A word about the tax returns themselves: they must be submitted electronically via the tax authorities' ELSTER portal. If you want to submit your tax returns yourself, you should register here promptly and quickly.
Note: In a joint webinar, Patrick Bernd Findeis and Elena Reuter discuss the topic of property tax in detail: Watch the video
About the author
Elena Reuter
As Head of Real Estate, Elena Reuter is responsible for FINVIA's real estate division.
Ms. Reuter successfully completed her Bachelor's degree in Real Estate Management at the HfWU Nürtingen-Geislingen. After completing her Master's degree in International Finance & Entrepreneurship, she began her professional career as an asset manager at AFIAA (Investment Foundation for Real Estate Abroad) in Zurich, where she was responsible for the asset management of the European portfolio. Elena Reuter then joined HQ Trust, the multi-family office of the Harald Quandt family, as a partner. One focus of her work was advising and managing private and institutional real estate mandates. As an MRICS (Professional Member of the Royal Institution of Chartered Surveyors), Ms. Reuter is committed to the special standards and compliance with professional ethics rules towards her clients.
