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Why Germany's property tax reform is mired in chaos

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The Local ([email protected])
Why Germany's property tax reform is mired in chaos
Homes in Nierstein, Rhineland-Palatinate. Property owners have to submit a tax declaration by January 31st. Photo: picture alliance/dpa | Silas Stein

Millions of property owners in Germany still have to file the confusing property tax declaration ahead of the Tuesday deadline. Taxpayer and tax consultant groups say the reform is chaotic and should be postponed.

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With the deadline looming, around two-thirds of property owners in Germany had submitted their updated property tax declarations just before the weekend. That still leaves millions who still have to fill out the confusing and cumbersome declaration by midnight on Tuesday.

The declarations are part of a government initiative to reassess German property tax around the country. That’s because German properties are based on old valuations that haven’t been updated for over 50 years. The government intends to use the declarations to arrive at updated valuations, meaning that property tax amounts could end up increasing.

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Anyone who owns property in Germany – from individual owners to commercial landlords – has to fill out a separate declaration for each property they own. Some tax consultants fill them out for a fee. But anyone doing it themselves contends with a long, confusing application full of property law terms even the average German will have a hard time understanding – let alone a foreigner.

The process has also been mired in chaos from the beginning, with the ELSTER tax system crashing as soon as it rolled out the electronic filing for property tax in July.

That’s part of why several associations are now criticising the reform process.

“New property tax value decisions should definitely be issued provisionally,” read a joint letter to the federal Finance Ministry from the German Taxpayer Association, the German Tax Union, Association of Tax Advisors, and the Property Owners Association. The associations note there’s already objections and lawsuits pending, particularly concerning the new property value calculation method.

READ ALSO: EXPLAINED: The German property tax declaration owners need to know about

Will the deadline be extended?

The associations recently called for the January 31st deadline to be extended. The Finance Ministry, however, declined, having already extended the deadline once at the end of October 2022.

It’s not clear what penalties may apply to people who don’t file on time, particularly if so many people miss the deadline. Depending on the federal state, non-filers may first get a reminder notice before eventually being hit with late payment surcharges.

Property owners can send in their declarations electronically to the tax office. Owners can also apply to their local tax office for an extension. But there is no guarantee this will be granted.

Do tenants have to worry about this?

Not directly, no.

Only property owners in Germany have to file this declaration. However, if it results in higher property taxes, there’s a chance landlords may pass this cost on to tenants. However, the new property tax values are still about two years away, coming into force on January 1st, 2025.

READ ALSO: Update: What you need to know about the German property tax reform that affects us all

Vocabulary

Property tax – (die) Grundsteuer

Deadline extension – (die) Fristverlängerung 

Piece or parcel of real estate property – (das) Grundstück

Calculation – (die) Berechnung

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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