According to the will of the legislator, the property tax reform is to be implemented on 01 January 2025. In order to meet this deadline, all land and property owners must submit a property tax declaration to their tax office. The data contained in it is used by the tax authorities to recalculate the property tax. Depending on the German state in which the land or real estate is located, you will need to obtain different information for your property tax return. The property tax reform does not change the previous procedure for calculating the property tax. Why was a property tax reform necessary? The German tax authorities use the property tax to tax land and real estate. As a basis for the determination, the land values are currently applied, which were set by the legislature in 1964 (old federal states) and 1935 (new federal states). In a decision dated April 10, 2018, the Federal Constitutional Court declared the determination of property tax on the basis of the old property values to be unconstitutional because the development of the value of land and real estate is not included therein. To ensure that this changes in the future, the Federal Constitutional Court has instructed the legislature to develop a new procedure for determining the real estate tax. This is to be initiated with the implementation of the land tax reform. The basis for determining the new property tax will then no longer consist of the outdated property values, but rather the property tax value determined using the data from the property tax return.
The calculation and levying of real estate tax is based on the provisions of the Real Estate Tax Act and the Valuation Act. The regulations contained herein have been adapted accordingly for the implementation of the property tax reform.
In order for the property tax reform to start appropriately on the set date, you as the owner of a plot of land or real estate are also under obligation. In the period from July 01, 2022 to Januar 31, 2023, you have time to submit your property tax return to the tax office. Before you submit the declaration digitally via the ELSTER form of the tax authorities, you must obtain the necessary data.
The property tax reform is not implemented in the same way in all federal states. If your property is located in Baden-Württemberg, the land value model will apply. If you have to submit a property tax return for a property located in Bavaria, Lower Saxony, Hamburg, Hessen or Lower Saxony, the new property tax is calculated using the area factor model. All other federal states base their calculation of the new property tax on the federal model. If your tax authority uses the land value model, you must provide additional information for the calculation in addition to the land register data. This includes the standard land value and the land area. If the area factor model is used, the living area is also decisive for determining the new property tax. If the property tax reform is implemented using the federal model, additional data is required. These relate, for example, to the type of property, the number of apartments and the number of garages.
You provide the data to your tax authority when you submit your property Tax Return. The tax authorities will only recognize the submission if you have submitted it electronically using the tax authorities’ ELSTER forms. A submission in paper form will not be recognized.
The legislator has set a fixed time frame for the submission of the property tax return when implementing the property tax reform. The earliest date for submission is July 01, 2022. The latest deadline set by the legislator for the implementation of the property tax reform is Januar 31, 2023 by 23:59. If you submit your property tax return after this deadline, you will be deemed to have disregarded the submission deadline.
A property tax return that is not filed or is filed too late will result in the same consequences as an income or sales tax return that is filed too late. This means that your tax office may assess a late filing surcharge. The assessment of a surcharge for late filing is regulated by law in Section 152 of the German Fiscal Code (Abgabenordnung). According to this, the tax office is entitled to assess a late payment surcharge that amounts to at least 10% of the assessed tax and a maximum of 25,000 Euros.
The property tax reform does not provide any new calculation method for determining the new property tax. As previously, the new property value is multiplied by the property tax rate and the municipality's assessment rate. The result is the amount that you will have to pay as the new property tax from 2025. The property tax rate is a specific figure that is used to calculate the property tax. Depending on the type of property, it ranges from 0.31 per mile to 0.34 per mile. For a two-family house in the old federal states, for example, the tax rate is 0.31 per mile. The assessment rate for property tax is determined individually by the municipalities. If the property is located in Leipzig, for example, a property tax assessment rate of 650% applies. For example, for a two-family house in Leipzig, a property value of 60,000 Euros is determined. Based on this information, the property tax from 2025 is calculated using the following formula: Property tax = property value x property tax rate x assessment rate = 60,000 Euros x 0.31 per mille x 650% = 1,209 Euros Property tax will continue to be due quarterly on the following dates: February 15, May 15, August 15, and November 15. In the above example, an amount of 302.25 Euros is due in each case.
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