This is what real estate owners need to consider
As a result of the property tax reform, property owners are required to submit a property tax return by the end of October 2022 at the latest. Many owners already received information letters from the tax offices in the spring to this effect. A total of 35 million properties are affected by the 2022 property tax reform. We explain what needs to be taken into account when making the declaration.
Definition and purpose of property tax
The real estate tax, or property tax, is levied by municipalities and cities. All owners of real estate are obliged to pay this tax. The legal basis for this tax is the Real Estate Tax Act, and how it is calculated is determined by the respective municipalities. The real estate tax is an annual tax that is levied on all forms of real estate and property. It also applies to partial ownership and leasehold rights. There are different types of land tax depending on the form of real estate ownership. Property tax A is payable on land used for agricultural purposes, while property tax B is payable on all privately used developed and buildable land. Landlords can apportion the property tax to tenants, as it is one of the apportionable incidental costs.
Property tax reform 2022: What will change
As early as April 2018, it was determined via a judicial ruling that the regulations for property tax in place until then were not constitutional, as the previous standard valuations were based on outdated values - in the old federal states on standard land values from 1964, in the new ones on standard land values from 1935. This led to major inequalities in the valuation of real estate assets, as these have changed significantly over the years and in some cases deviate significantly from the actual values. For this reason, the new property tax reform was passed. Property owners must submit a declaration of assessment by October 31, 2022, in order to calculate the new property tax from 2025. This is to ensure that property tax calculations are based on current values. Some owners will have to pay a higher tax rate, while it will be more favorable for others. However, it is not yet possible to specify the individual tax rate.
Calculation example: Property tax recalculation in Berlin
Depending on the federal state, different regulations apply to the assessment, as the states could choose between the value-oriented federal model or a specially formulated assessment system. In addition, there is the area model, the area-location model, the residential location model or the area-factor model. For Berlin, the model determined by the federal government applies to the calculation of the new property tax. To recalculate the property tax, the following formula is to be used: Unit value x property tax rate x assessment rate = annual property tax. For a single-family house, the property tax rate is 2.6‰, while the assessment rate in Berlin is 815%. If a single-family house has an assessed value of 20,000 euros, this results in the following calculation: 20,000 euros x 2.6 permille x 810 percent = 421.20 euros per year. This means that a tax of 105.30 euros must be paid per quarter.
Declaration of assessment: This is the necessary data
In the declaration provided by the tax offices in July 2022, the location, property type & area, living space as well as year of construction and, in the case of multi-family houses with condominiums, the ownership share must be stated. The standard land value is also an important factor for land tax, which is included in the calculation and must therefore be stated. The declaration is transmitted electronically via the ELSTER portal to the relevant tax office. For some, the calculation of the living space, in particular, can be a challenge. In the case of private owners, it might be easier to choose the gross floor area to be assessed. It may be somewhat higher, but this is unlikely to have any significant tax implications for residential properties. Rough estimates are not recommended, as the tax office attaches great importance to accuracy here. If you are not sure, you can submit the declaration as a provisional assessment and still correct the taxes in 2023.
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