Real estate tax reform: special features in the federal states

A total of seven states have opted for deviations from the federal regulations in the property tax reform.

Seven federal states have rules for calculating property tax on residential and commercial premises and undeveloped land that differ from the federal model. Two states have different regulations for the tax measurement figures, while five other states use in part drastically simpler calculation methods. Here is an overview of the regulations in these states.

• Baden-Wuerttemberg: Of all the German states, Baden-Württemberg has the simplest procedure for determining the new property tax. With this modified land value model the valuation is essentially based on two criteria: the land area and the standard land value, which are multiplied by each other and result in the so-called property tax value. The type of development is irrelevant. However, the tax rate is reduced by 30 % for land that is predominantly used for residential purposes. Social housing and cultural monuments will also benefit. This means, for example, that a property with a residential building may be subject to a lower property tax than a neighboring property of the same size without buildings.

• Bavaria: The Bavarian Real Estate Tax Act applies value-independent surface model an. The only decisive factors are the area of the land and building and the use of the building. The value of the land and thus also the standard land value are irrelevant. For the land tax, the areas are assessed with uniform state-wide equivalent figures, which amount to 0.04 euros/m² for the area of the land and 0.50 euros/m² for building areas. The sum of the equivalent amounts then results in the property tax assessment amount. For residential areas, a discount of 30 % is granted, but only on the building area and not on the land area. Besides, an additional reduction of 25 % is provided for social housing and architectural monuments.

• Hamburg: At the Hamburg Residential Location Model the property tax is determined primarily on the basis of the size of the property, the area of the building and the residential location of the property. For land area 0,04 Euro/m² and for building area 0,50 Euro/m² is applied. For residential areas, the value of the building area is reduced by 30 %. A distinction is made between "normal" and "good" residential locations. The basis for this is the Hamburg residential location index, which has been tried and tested in the rent index. For a normal residential location, there is a further reduction of 25 %. There are further reductions of 25 % for listed properties and for social housing.

• Hesse: Hesse has opted for a Area factor method which is based on the Bavarian area model and also adopts the equivalent amounts of 0.04 euros/m² for land and 0.50 euros/m² for the building area. However, the sum of the equivalent area amounts is multiplied by a factor. This factor is higher the better the location. To assess this, the standard land value for the property is compared with the average standard land value in the municipality. The tax office automatically receives the standard land values from the cadastral administration. As in other federal states, there is a discount of 30 % for residential land.

• Lower Saxony: In Lower Saxony, the property tax is based on a Area-Location Model which is identical in principle to the Hessian model. The areas are assessed with uniform state-wide equivalent figures, which amount to 0.04 euros/m² for land and 0.50 euros/m² for building areas. For residential areas, a discount of 30 % is granted, but only on the building area and not on the land area. Besides, an additional discount of 25 % is provided for social housing and architectural monuments. The sum of the area allowances is multiplied by the location factor. The better the location, the higher the factor. To assess this, the standard land value for the plot is compared with the average standard land value in the municipality. The formula contains a damping component, so that, for example, a standard land value that is twice as high as the average only increases the property tax value by a good 23 %, while a standard land value that is half as high reduces the property tax value by just under 19 %.

• Saarland and Saxony: Although Saarland and Saxony apply the federal model for determining the tax base, they have in some cases set different tax measurement figures. Compared with the federal model, Saarland has opted for higher tax assessment figures, while in Saxony commercial land is assessed at twice the level of residential land and undeveloped land.