Property tax reform Germany 2025: What do landowners need to know?

Property tax reform in Germany – 35 million properties must be revalued! In 2018, the Federal Constitutional Court ruled that there must be a fundamental reform of the property tax. Reason: The valuation basis based data, are over 50 years old (more precisely 1964 and 1935). Until 31.12.2024 the reform of the land tax is to be settled now by the legislator. That is why owners throughout Germany are now receiving letters from their tax offices, with a request to submit up-to-date data, for the revaluation of the properties. Read everything you need to know about the property tax reform here.

What is the property tax?

Homeowners, apartment owners, land owners, all are subject to property tax in Germany. The property tax is incurred annually and is calculated by the tax offices, more precisely the location tax office.

Property tax for owners of:

• Houses
• Condominiums
• Land

How to calculate the property tax?

Calculation in 3 steps – To calculate the amount of property tax, for a single property, there is a formula with 3 steps. First, you need the assessed value, simply put, the valuation from the tax office for your property.

Step 2 is the property tax rate, simply put, depending on the type of property you own, the value will be higher or lower. Example: In a semi-detached house, the property tax measurement number is slightly lower than a detached single-family house. Step 3 is the property tax assessment rate. This is set individually by each municipality. In this way, municipalities can also make themselves more attractive to house builders and capital investors, for example.

Formula:

• Determined assessed value x real estate tax rate x real estate tax assessment rate

The basis is the assessed value – the higher the assessed value of your property, the more property tax you pay, compared to the other owners in your community.

Property tax quickly explained

Let’s quickly summarize the property tax again, with the main apsects.

Property tax quickly explained:

• Annual tax on real estate
• Step 1 – Assessment basis = assessed value (valuation of your property by the tax office)
• Step 2 – Property tax rate : Property type
• Step 3 – Property tax assessment rate: Municipal assessment rate

Change due to real estate tax reform

1. Revaluation of ~ 35 million properties
2. Uniform evaluation by the federal government
3. Property tax C as a new category

Revaluation of ~ 35 million properties

Property tax has always been controversial since its introduction in 1998. This is because the basis for the valuation according to the BewG (Valuation Act) are outdated values from 1964 (old federal states) and 1935 (new federal states).

In 2018, the Federal Constitutional Court therefore ruled that there must be a fundamental reform of the property tax. It is to be implemented by 31.12.2024. Therefore, owners are now receiving letters from their tax offices, with a request to submit current data, for the revaluation of the properties.

• Old values from 1964 (old BL) and 1935 (new BL)

Read more about the methodology of the assessment here:

• Income capitalization approach
• Material value method

Uniform evaluation by the federal government

• Planned: Uniform federal evaluation methods
• Current: Different valuation methods in federal states

Property tax C as a new category

Still there are 2 types of property tax, property tax A and property tax B. Property tax “A” is used for land with agricultural and forestry use or short for agricultural. Property tax “B” you use for other developed and buildable land, so everything with building use.

With the property tax reform, there will be another category, the property tax C.

• Land tax “A” – agricultural use (land with agricultural and forestry use)
• Property tax “B” – building use (other developed and developable land)

Property tax “C” separates the previous property tax “B” into 2 parts. in property tax “B” will remain all other, developed land. Property tax “C” will be only for detached properties. That is, land that is not built on, but for which a permit has long been in place.

The aim of property tax “C” is to create new living space. Vacant land that is likely to be built on can thus be given its own (even higher) levy rate.

• Property tax “C” – detached building plots