2022 Property Tax Reform

Property tax assessment return: We´ll take care of it for you!

2022 Property Tax Reform

Leave your assessment return up to dhpg

The property tax reform will be entering into force in 2022. According to the German Federal Ministry of Finance, the request to submit the assessment return for recalculation of property tax will probably be communicated through the public media at the end of March 2022. As things stand at present, taxpayers will have until 31 October 2022 to submit their assessment returns to determine the new property tax amount beginning in 2025. Depending on the number and location of your real estate and properties, this can mean a lot of data. You should also note that the fiscal authorities only accept assessment returns in digital form via an online platform. It is not possible to submit them in paper form. dhpg has a pragmatic digital procedure for preparing your data and will be glad to perform the entire procedure for you.

Background

Die Grundsteuer wurde in der Vergangenheit nach dem so genannten Einheitswert berechnet. Dieser wurde zuletzt 1964 für die alten Bundesländer und 1935 für die neuen Bundestländer festgestellt.In the past, property tax was calculated according to a so-called standard value. This was last determined in 1964 for the old German Länder and in 1935 for the new German Länder.

No longer constitutional

In 2018, the Federal Constitutional Court held the standard valuation as the basis for levying property tax to be incompatible with Article 3 (1) of the Basic Law (the German Constitution) and hence unconstitutional.

Reform

As a result, the German Bundestag has reformed the property tax regime, and every property owner must now submit an assessment return in 2022. Calculation models differ among the various Länder.

The easy path to an assessment return

Your assessment return for the recalculation of property tax must be submitted to the fiscal authorities by no later than 31 October 2022. You should start preparing for this now. The experienced advisors at dhpg will be happy to support you with their technical expertise and come up with a simple, digital solution to prepare your data. And in no time at all, your tax assessment return will be completed.

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That´s how fast your property tax return will be completed!

So you would like support with your assessment return? Feel free to contact us directly.

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FAQ - Questions on property tax and the assessment return

What is property tax and why is it levied?

In Germany, property tax is levied on developed and undeveloped properties, real estate and various building rights (e.g. leaseholds and heritable residential building rights). Property tax must be paid by private individuals as well as companies that own such assets. The respective city or municipality is in charge. Until now, a so-called standard value was used to determine the property tax, which the Federal Constitutional Court declared unconstitutional in 2018, as the property tax was not based on current value ratios, nor did it take into account increasing property values in recent years. The reasoning was justified, considering that the last main assessment was carried out for the old German Länder in 1964 and for the new Länder in 1935. Thus, lawmakers faced the task of adopting new regulations on the basis of which a revaluation of all land and real estate in Germany can be carried out from 2022 onwards - the 2022 property tax reform. The aim of the fiscal authorities is first of all to require all property owners this year to submit an assessment return to serve as the basis for the property tax calculation. The property values determined on the assessment date of 1 January 2022 will be used to calculate property tax beginning in 2025.

To determine the new property tax, the formula "property tax value x tax rate x assessment rate = property tax" applies. The fiscal authorities will determine the property tax value on the basis of the property tax assessment return, which is to be requested in 2022. The tax rate is set by law and the assessment rate is set individually by the cities and municipalities.

Is property tax the same everywhere in Germany?

Unfortunately not. Calculation of property tax within the framework of the 2022 property tax reform is based on different calculation models throughout Germany:

  • The federal model was developed as a basic model, and is now being used by Berlin, Brandenburg, Bremen, Mecklenburg-Western Pomerania, Rhineland-Palatinate, Saxony-Anhalt, Schleswig-Holstein and North Rhine-Westphalia. Saarland and Saxony use other tax measurement figures. Depending on use, the valuation is performed according to the capitalised earnings value method or the simplified asset value method:
    • The capitalised earnings value method applies to the valuation of residential properties. It is not necessary to determine their actual values, as the Länder stipulate flat-rate values. In addition, there are net rents excluding utility and heating costs, operating costs and land value.
    • The simplified asset value method is used to determine the value of business properties and mixed-use properties. For this, the land value and normal production costs, which depend on the type of building and the year the building was constructed, are used.
  • In addition, there is also the land value model, which is based exclusively on the land area and the standard land value - irrespective of property development - and is used in Baden-Württemberg.
  • The area model applied in Bavaria takes into account the land area and the building area and multiplies these by so-called equivalent figures.
  • The area-location model basically follows the same methodology as the area model, but in addition takes into account an individual location factor. If you come from Hamburg, Hesse or Lower Saxony, you should familiarise yourself with this.

Do companies also have to pay property tax?

Yes, companies are also obliged to pay property tax if they have real property, i.e. if they own land or real estate. If your company has a large real estate portfolio, a basic distinction must be made according to the use of each asset in order to apply the correct valuation method for the assessment return. Residential properties and residential real estate fall under the so-called capitalised earnings value method, while business properties are valued under the simplified asset value method. In addition, not all the Länder also apply the federal model. Therefore, if you have a broad portfolio of properties and land, you should pay attention to which model the respective Länder use to calculate property tax and thus to prepare the property tax assessment return. In case of doubt, you will need different data, which cannot always be found in purchase contracts or land register entries. You may have to call in an expert to calculate the usable or living space of your property if this does not emanate from your documents.

How expensive for me is preparation of the assessment return with the help of dhpg?

If you place the assessment return for your real estate and land in the hands of our dhpg consultants within the framework of the real estate tax reform, this will at any rate save you a lot of work. We have a simple, digital solution for you in which you can conveniently enter your data, such as the number and location of your properties or plots of land. Of course, we also need the additional information required for the property tax assessment return - we will then attend to the calculations and communicate with the fiscal authorities for you. You can be sure that we will keep an eye on all the parameters for you and ensure that the assessment return for property tax is correct in each and every case - and all this in each of the Länder and for each piece of real estate as well as each property. This is a service that is worthwhile making use of, especially for companies and private individuals with large portfolios.

If you are interested, just get in touch with us using the above form - no strings attached. We will be happy to quickly provide you with more information.

What will happen if I do not respond to the request to submit the assessment return?

Landowners are legally obliged to submit a property tax return. This also means that they must comply with the request to submit the property tax assessment return.

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