How to calculate the property tax in Germany

What is the property tax?

In Germany, the land tax is a Tax that is levied on the ownership of real property. A distinction is made between the so-called Grundsteuer A (land tax A) and Grundsteuer B (land tax B):

• Land tax A (agricultural) is levied on land for agriculture and forestry.

• Land tax B (structural) is levied on developed or developable land and buildings.

The reform of the land tax implemented by the federal government also includes the introduction of the Land tax C which is intended to give municipalities the option of taxing undeveloped land at a higher rate in order to reduce speculation in housing.

The essential basis for calculating the land tax is the so-called Standard value. This is determined by the responsible tax authority for each undeveloped or developed property individually and in a legally regulated procedure. In simplified terms, the standard value thus describes the value of a property.

Who pays the property tax?

As a rule, every Owner of a property Pay property tax to the municipality.

However, there are also exceptions where no property tax has to be paid. Exempt from land tax is, for example, property that is used by legal persons under public law for a public service. Nor does land tax have to be paid for official residences of clergy and church servants of religious societies under public law.

Private individuals, on the other hand, generally always have to pay.

Property tax - how often to pay?

The question frequently arises as to how often and when property tax is due. As a rule, property owners must pay every three months every three months.

However, it may be possible to make other arrangements with the competent authorities.

If, on the other hand, the tax is paid per quarterthe contributions are due on 15 February, 15 May, 15 August and 15 November.

How is the property tax calculated?

In order to calculate how much property tax is due for a particular property, one needs three factorsthe standard value (also called property value) mentioned above, the tax rate and the so-called assessment rate. We will briefly explain the exact meaning of these terms here:

As already mentioned, the standard value describes the value of the property. Since the decisive determination of the standard values in Germany dates back many decades, the real values differ massively from the standard values used for property tax. In West Germany the standard values are based on Data from 1964and in eastern Germany even on values from 1935. As part of the 2022 reform, the standard values for all land and buildings in Germany will be by 2025 redefined.

The Steuermesszahl (also called the property tax rate) is a figure used to calculate the property tax. This measurement figure is given in per mille and varies depending on the type of building or property. In Germany, a distinction is also made between property tax assessment figures for the old and the new federal states. Generally, higher values apply in the new federal states. In addition, a distinction is made here between New or old building and the Size of the municipality size of the municipality.

Property tax rates in the old federal states:

• 6.0 ‰ for land used for agriculture and forestry.

• 2.6 ‰ for single-family houses for the first € 38,346 of the assessed value. All values above this are calculated at 3.5 ‰.

• 3.1 ‰ for two-family houses.

• 3.5 ‰ for all remaining property types.

Property tax rates in the new federal states:

• 6.0 ‰ for land used for agriculture and forestry

Single-family houses of the old building

• 10 ‰ in municipalities with up to 25,000 inhabitants.

• 8 ‰ in municipalities between 25,000 and one million inhabitants.

• 6 ‰ in municipalities with more than one million inhabitants.

Single-family houses of new construction - the following figures only apply to the part of the unit value that is below € 15,338:

• 8 ‰ in municipalities with up to 25,000 inhabitants.

• 6 ‰ in municipalities between 25,000 and one million inhabitants.

• 5 ‰ in municipalities with more than one million inhabitants.

New buildings - for single-family houses, the following figures only apply to the part of the assessed value that exceeds € 15,338:

• 8 ‰ for new buildings in municipalities with up to 25,000 inhabitants.

• 7 ‰ for new buildings in municipalities between 25,000 and one million inhabitants.

• 6 ‰ for new buildings in municipalities with more than one million inhabitants.

Undeveloped land:

• 10 ‰ uniformly

As part of the reform, the tax assessment rates are reduced to to one tenth of their previous value devalued. The reason: due to the determination of the new standard values by 2025, the current, higher land prices would result in a massive increase in the property tax to be paid if the tax assessment figures were to remain at their previous level.

The assessment rate is a factor under tax law that is used to calculate the tax liability. In contrast to the assessed value, it is not calculated individually for each property, but for a entire municipality municipality. It is thus an important instrument through which municipalities can regulate the level of municipal taxes. To prevent commercial tax havens, municipalities in Germany are prohibited from applying an assessment rate below 200%. In most cases, the assessment rate is between 400% and 800%.

Calculating property tax - an example

The property tax can be calculated from the above factors using the following formula:

Assessed value x property tax rate x assessment rate = annual property tax

For clarification, here is an example for a single-family house with a assessed value of €20,000 in Berlin. In this case, the basic tax rate for single-family houses is 2.6 ‰ and the assessment rate in Berlin is 810 %. This results in the following example calculation:

20.000 euros x 2.6 per mille x 810 per cent = 421.20 euros

The property tax for this fictitious property in Berlin is therefore 421.20 euros per year, or 105.30 euros per quarter.

Do tenants have to pay land tax?

Property owners are not always the only ones who have to pay property tax. Tenants can also be affected. Landlords have the option of passing on the property tax to the tenant and charging it accordingly as a Ancillary costs as ancillary costs. The amount the tenant has to pay often depends on the area of the rented flat.