According to experts, the area model of the property tax reform was implemented in an exemplary manner, especially in Bavaria. But what if the contribution increases from 198 euros to 2,550 euros in the future? Happened to a property owner from Lower Bavaria. First an isolated case.
“The Bavarian property tax model is a prime example of an unbureaucratic tax law, simple and transparent.” That’s what Albert Füracker says. He is finance minister in the Söder cabinet and therefore not entirely impartial. “The Bavarian model is simple and easy to use,” says Rudolf Stürzer. He is a lawyer and chairman of the house and landowners association in Munich and the surrounding area. “We are very satisfied with the model.”
Klaus Grieshaber, also a lawyer and Vice President of the Association of Taxpayers in Bavaria, made a similar statement. He sees the Free State as a role model for Germany in terms of property tax. The renowned tax expert and constitutional lawyer Gregor Kirchhof from the University of Augsburg emphasizes: “Bavaria has launched a simple area model in which the areas of the buildings and properties are decisive.”
Richard Huber does not like to join in these hymns of praise. The 70-year-old has now received mail from the tax office after he “tormented himself through Elster” in August. In his assessment of the property tax amount, which FOCUS has online, this is shown as EUR 749.91 for his property.
This property tax amount multiplied by a factor of 3.4 – the current assessment rate for his municipality is 340 percent – results in an amount of 2549.69 euros. Previously, he had to pay property tax of 198 euros per year. It would be an almost 13-fold increase.
In 2018, the Federal Constitutional Court ruled that the property tax in its former form was incompatible with the Basic Law. The relevant standard values were based on completely outdated data from 1964 in West Germany and 1935 in East Germany. The Karlsruhe judges instructed the parliamentarians to pass an amendment to the law, which they did.
On January 1, 2025, property tax will be reassessed throughout Germany. Owners have until the end of January 2023 to submit the declaration to determine the property tax value of their properties. Some federal states have decided to pass their own property tax laws, deviating from the federal model. Baden-Württemberg, for example, opted for the so-called standard land value model, while Bavaria opted for a pure area model.
The area model is based on the idea that the larger a piece of land and a building causes more expenditure for the public services of the community. However, its value has no effect whatsoever on the extent to which these infrastructure services are used. Accordingly, the calculation basis in Bavaria from 2025 will only be determined according to the physical size of the property and building area and the use of the areas.
The reform should be revenue-neutral for the cities and municipalities, which are largely financed by the property tax in addition to the trade tax. This means that from 2025 onwards they should not take in more than before. The administrations can control this via the assessment rate. In Munich, for example, this is 535 percent for developed and undeveloped land, in Augsburg it is 555 percent and in Graefelfing it is 200 percent.
“It can be more expensive for plots that are large,” says Rudolf Stürzer from Haus Grund Munich. Klaus Grieshaber from the Bavarian taxpayers’ association makes it clear: “There will be shifts, in individual cases this can be problematic.”
Richard Huber is such an isolated case. His inherited property is over 16,000 square meters. His mother’s apartment, which is in need of renovation, has a floor space of 105 square meters, and the office space for his insurance agency is an additional 100 square meters. He lives in a terraced house not too far away.
His parents gave up farming as a sideline in 1968. A large part of the land in question consists of meadow orchards and fields. “Least-land” official. Huber calls it a “natural paradise for insects and birds”.
To be on the safe side, he asks the tax office whether there might be a calculation error. In the hotline, he is told that if the areas specified in the decision are correct, that’s okay, that’s the law, he reports to FOCUS online.
We ask the Bavarian State Tax Office (LfSt) and get a quick and detailed answer – and Richard Huber may have a valuable tip:
“The extreme increase in the property tax amount in the case you describe in Lower Bavaria could at best be due to the fact that the taxpayer himself declared the meadow orchard with property tax B and not with property tax A, as was previously the case,” it says. “The change from former property tax A to property tax B leads to an increase in the property tax amount, as has been the case up to now and also in all other new property tax models.”
Property tax A stands for “agricultural”, i.e. agricultural and forestry operations. B for “structural”, i.e. developed, but also undeveloped land.
The reform for the new property tax is complex – and this year it will require owners. You have to submit some data to the tax office. You have to be very precise and observe special deadlines. In our large guide you will find all the information you need to know in a compact form.
In principle, the State Office for Taxes further states: “An area that belonged to an agricultural and forestry operation remains in this allocation until the agricultural and forestry operation is given up for income tax purposes or the area is used for other purposes becomes. The meadow orchard of a part-time farmer also remains in property tax A. It is only different in the case of residential buildings, which will always be subject to property tax B in the future, even under the federal law applicable to Bavaria.”
In the case of very large properties – especially in rural areas – the distinction between property tax A (agricultural and forestry operations) and property tax B (properties of real estate) is crucial, since property tax A continues to be calculated as an income value and the classification so it should usually be cheaper.
According to LfSt, an agricultural and forestry operation includes:
In the case of allocation to real estate, Art. 3 Para. 1 Sentence 2 of the Bavarian Property Tax Act (BayGrStG) creates two options for reducing the equivalent number. The latter is purely arithmetic and amounts to EUR 0.50/sqm for building areas and EUR 0.04/sqm for land areas.
On the one hand, this is the case if at least 90 percent of the building is used for residential purposes and the area of the land is larger than 10 times the living area. On the other hand, if the area of the land is at least 10,000 square meters and at least 90 percent is neither built on nor paved.
Easy? It’s going ok. After all, nothing that should cause sleepless nights for the majority of owners of the approximately six million properties in the Free State. In addition, the Bavarian state government has appealed to all municipalities not to levy higher taxes in their area than before the reform – and to adjust the assessment rates accordingly.
The property tax return must be submitted by January 31, 2023: With the “GrundsteuerErklärung” software from Steuertipps.de, you can master the task yourself in no time at all.
In 2024, the municipalities will determine the assessment rates for 2025. Only then is it finally clear whether Richard Huber will stay with the 2550 euros for his property.
However, if the property tax amount of EUR 749.91 reported by the tax office remains, the assessment rate would have to be reduced very significantly so that Huber would even come close to ending up with his previous EUR 198 property tax per year. However, the insurance company does not believe that there was a transmission error, i.e. that he issued an A for a B. “I will definitely appeal now,” says Huber. “Let’s see what happens.” FOCUS online will stay tuned to the case and report.
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