German federal government revises property tax reform

The property tax („Grundsteuer“) in Germany must be reformed by the legislator by the end of 2019, as the Federal Constitution court had declared the current legal regulation unconstitutional.

The German tax authorities currently collect around 13.3 billion euros from property tax (2016).
The taxation is based on the so-called unit values („Einheitswerte“) from the years 1935 (new federal states) and 1964 (old federal states).

The Federal Constitutional Court had decided after submission of several cases by the Federal Fiscal Court that the current regulation for the calculation of property tax was arbitrary and therefore constitutionally inadmissible. The Constitutional Court has therefore instructed the legislator to formulate a new legal regulation which, among other things, is based on the current land value of the respective property. In such a calculation, rents obtained could then also be taken into account.

It is currently not possible to foresee what the new legal regulation will look like in the end.
The political decision-making process is underway. It is feared that the property tax for many properties could increase massively. This would drive up land prices and also increase costs for tenants of residential properties. In Germany, tenants of residential real estate pay their share of property tax via the service charge settlement.