Why homeowners are taking legal action against Germany's property tax reform
Property owners in Germany were called on to send the tax office an updated declaration of their property value to help calculate how much they’ll have to pay in tax. But many homeowners are rallying against the reform.
Anyone who owns property in Germany, whether it's an individual owner or commercial landlord, has had to fill out a declaration and send it to their tax office.
But the process has been chaotic due to issues like technical difficulties, a confusing application form full of German property law jargon and deadlines that haven't been met by everyone. Meanwhile, many are unhappy with the planned changes due to come into force at the start of 2025.
READ ALSO: Why Germany's property tax reform is mired in chaos
The Grundsteuer reform was launched after Germany’s highest court declared the country’s current laws on property tax unconstitutional back in 2018 because the property values currently used to calculate what an owner owes are out of date.
But opponents of the controversial reform are taking action against it - and the first so called model lawsuit (Musterklage) has been filed. It is expected to go all the way to the federal constitutional court, reported German business outlet WirtschaftsWoche on Friday.
In Berlin, a property owner filed a complaint with the fiscal court with the support of the property owners' association Haus & Grund and the Taxpayers' Association.
They are rallying against the "federal model" of the property tax reform, which all federal states except Bavaria, Hamburg, Hesse, Lower Saxony and Baden-Württemberg follow. In this system the authorities determine the property tax value on the basis of rental value tables and standard land values.
According to Sibylle Barent, who heads the tax and finance policy department at the homeowners' association Haus & Grund, this creates "serious injustices" because the rents are sometimes significantly lower than the values given in the rental value tables.
Plus different conditions within a defined zone, such as the location or the furnishings of a flat, are not taken into account, Barent said.
Although the reform directly affects property owners, any extra costs are expected to be passed over to tenants from landlords, meaning everyone in Germany is affected.
Barent said: "Even rental reports with deviating values are not taken into account because the law does not provide for this. Moderate landlords or their tenants would thus be taxed unduly."
Baden-Württemberg has opted for "an even more unfair assessment system" than the federal model, added Barent.
The court action has taken several months to be declared because tax authorities hadn't processed the many appeals filed by those affected. These appeals needed to dealt with before any court action could be taken.
What happens next?
As part of this reform, almost 36 million properties nationwide will have to be revalued using owner information. For the municipalities, property tax is an important source of revenue. How much individual owners will have to pay in future depends on the so-called assessment rates of the municipalities.
READ ALSO: The German property tax declaration owners need to know about
The new property tax will be due from January 1st 2025 - but a decision isn't expected by the constitutional court before the reform kicks in.
Experts say that property owners will therefore have to pay whatever is due from them under the new tax reform, at least initially.
"Property owners will first have to pay property tax according to the new rules," said Barent. When the reform comes in, Barent urged anyone who has filed an objection with the tax authorities not to withdraw even if they feel pressured to do so.
Meanwhile, private citizens who want to sue because of any extra tax they're called on to pay are advised to wait for the outcome of the model lawsuits due to the costs involved with going to court.
Comments
See Also
Anyone who owns property in Germany, whether it's an individual owner or commercial landlord, has had to fill out a declaration and send it to their tax office.
But the process has been chaotic due to issues like technical difficulties, a confusing application form full of German property law jargon and deadlines that haven't been met by everyone. Meanwhile, many are unhappy with the planned changes due to come into force at the start of 2025.
READ ALSO: Why Germany's property tax reform is mired in chaos
The Grundsteuer reform was launched after Germany’s highest court declared the country’s current laws on property tax unconstitutional back in 2018 because the property values currently used to calculate what an owner owes are out of date.
But opponents of the controversial reform are taking action against it - and the first so called model lawsuit (Musterklage) has been filed. It is expected to go all the way to the federal constitutional court, reported German business outlet WirtschaftsWoche on Friday.
In Berlin, a property owner filed a complaint with the fiscal court with the support of the property owners' association Haus & Grund and the Taxpayers' Association.
They are rallying against the "federal model" of the property tax reform, which all federal states except Bavaria, Hamburg, Hesse, Lower Saxony and Baden-Württemberg follow. In this system the authorities determine the property tax value on the basis of rental value tables and standard land values.
According to Sibylle Barent, who heads the tax and finance policy department at the homeowners' association Haus & Grund, this creates "serious injustices" because the rents are sometimes significantly lower than the values given in the rental value tables.
Plus different conditions within a defined zone, such as the location or the furnishings of a flat, are not taken into account, Barent said.
Although the reform directly affects property owners, any extra costs are expected to be passed over to tenants from landlords, meaning everyone in Germany is affected.
Barent said: "Even rental reports with deviating values are not taken into account because the law does not provide for this. Moderate landlords or their tenants would thus be taxed unduly."
Baden-Württemberg has opted for "an even more unfair assessment system" than the federal model, added Barent.
The court action has taken several months to be declared because tax authorities hadn't processed the many appeals filed by those affected. These appeals needed to dealt with before any court action could be taken.
What happens next?
As part of this reform, almost 36 million properties nationwide will have to be revalued using owner information. For the municipalities, property tax is an important source of revenue. How much individual owners will have to pay in future depends on the so-called assessment rates of the municipalities.
READ ALSO: The German property tax declaration owners need to know about
The new property tax will be due from January 1st 2025 - but a decision isn't expected by the constitutional court before the reform kicks in.
Experts say that property owners will therefore have to pay whatever is due from them under the new tax reform, at least initially.
"Property owners will first have to pay property tax according to the new rules," said Barent. When the reform comes in, Barent urged anyone who has filed an objection with the tax authorities not to withdraw even if they feel pressured to do so.
Meanwhile, private citizens who want to sue because of any extra tax they're called on to pay are advised to wait for the outcome of the model lawsuits due to the costs involved with going to court.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.