date | theme

03. January 2022 | Property tax reform 2022: what is new?

03. February 2022 | The new property tax in Bavaria from 2025

04. February 2022 | Property tax in Baden-Württemberg from 2025 (this contribution)

07. February 2022 | Property tax in Saarland from 2025

08. February 2022 | Property tax in Saxony from 2025

10. February 2022 | Property tax in Hessen from 2025

11. February 2022 | Property tax in the Hanseatic City of Hamburg from 2025

14. February 2022 | Property tax in Lower Saxony from 2025

Baden-Württemberg is also introducing its own concept for collecting property tax in Germany as part of the property tax reform. The first collection of the property tax based on the state's own property tax law is planned for 2025. A modified land value model is used to calculate the property tax. An evaluation of the land alone by the local expert committees determines the land value first. This building-neutral ground value is multiplied by a variable control measurement number in order to obtain the basic control measurement amount. A 30% reduction in the tax figure is envisaged for real estate used for residential purposes. The municipalities entitled to lift then apply their individual lifting load to the measured amount from 2025. This will then result in the property tax in Baden-Württemberg in the future. In the collection of property tax A for agricultural and forestry enterprises, however, one largely follows the federal model. However, a property tax C in Baden-Württemberg should also apply, which the municipalities may apply to construction-ready but undeveloped land.

The property tax, which accrued over decades on land and buildings built on it, threatened to expire in 2022. The reason for this was that the regulations on this were only partially in line with the constitution of the Federal Republic of Germany. Therefore, the legislature had to reform the property tax law. But some federal states, especially the Free State of Bavaria, rejected the planned measures. In this case, the reform of the property tax law would probably have failed due to resistance in the Federal Council. However, an agreement was reached with a compromise. Because via an opening clause, the federal states were allowed to issue their own regulations for the collection of property tax in their territories.

Even before Bavaria adopted its own Bavarian Property Tax Act, Baden-Württemberg had already introduced its own at the end of 2020. As a result, there is a legal basis that justifies the collection of property tax in this area-rich federal state from 2025. We would like to report on this in a little more detail in this article. In this regard, we also want to take up some aspects of the Land Property Tax Act, which may conflict with the constitution of Baden-Württemberg.

As already mentioned, the Baden-Württemberg law on property tax is called Landgrundsteuergesetz. It consists of 62 paragraphs and 9 attachments. Compared to the 11 articles of the Bavarian Property Tax Act, for example, the Land Property Tax Act is much more extensive. So let's see what it does.

Seven parts form the Land Property Tax Act. The first part contains general rules. Part two describes assessment procedures. But the actual evaluation regulations can be found in the third part. Here the second section is of primary importance. It shall lay down the rules concerning property. It is noteworthy that despite the enormous importance of this second section, only §§ 37 and 38 LGrStG are included in it. The first section, on the other hand, deals with the basics of property tax A for agricultural and forestry enterprises and requires a total of eleven paragraphs. Also of great relevance is the fourth part. It deals with the actual calculation of the property tax. Part five explains the collection and payment of property tax. For most cases, however, probably less relevant is the sixth part. This provides for rules for cases in which a remission of property tax is provided for. Thus, the enabling and final provisions form the seventh part of the Land Grundsteuergesetz.

Since the Land Property Tax Act is to apply in parallel with the federal law applicable for this purpose, a restriction of the latter is inevitable in many aspects. In this respect, § 2 LGrStG is first of all important. This is because it refers to the rules governing the assessment, determination and the tax measurement procedure laid down in the tax code. For example, § 13 LGrStG stipulates that property tax values are also subject to a separate determination under the rules of the Tax Ordinance in this context. Consequently, this also leads to the issuing of declaratory decisions. However, § 163 AO is not to have any influence on it according to the wording of the following paragraph.

But also the administration of property tax in the municipalities is governed by the provisions of the tax code.

The main assessment is to take place every seven years. In this respect, the Land Grundsteuergesetz complies with the requirements of § 221 BewG. In addition, however, three circumstances may occur which are intended to require a new determination at an earlier time. On the one hand, this is the case when economic conditions change. This means the allocation of the respective economic units. But even if the value of EUR 15,000 deviates from the previously established value, a new determination should take place. And thirdly, the elimination of errors leads to a new finding. All three cases result in such an ex-post revaluation, referred to collectively as continuation.

In addition, there should also be a follow-up. On the one hand, this is the case with a newly created economic unit. As a rule, this takes place when building a previously undeveloped property. On the other hand, this should also apply to cases in which an already existing economic unit is to be subject for the first time to the collection of property tax. This may occur if a property previously exempted from taxation comes into the focus of taxation by a change of owner.

Conversely, a property previously subject to property tax may also be exempted from taxation or another tax-abrogating reason between two main dates of assessment. In this case, this leads to a cancellation of the property tax value existing until then.

The property tax that Baden-Württemberg levies on real estate is calculated analogously to the approach known from the previous procedure. For this purpose, an evaluation of the control object takes place first. This value is multiplied by the control measurement number provided for this purpose in order to determine the basic control measurement amount. In the third step, the lifting rate determined by the respective municipalities is then applied to the previously determined property tax measurement amount, from which the property tax then results.

Basis of assessment for the collection of property tax on agricultural and forestry enterprises is the income value according to § 25 LGrStG. The associated economic unit is the holding. It thus acts as a reference for the collection of property tax A in Baden-Württemberg.

In connection with the collection of property tax B, the land is the reference for determining the tax base.

Since the evaluation of the tax object in the taxation procedure for property tax in Baden-Württemberg takes place at the very beginning, we also start with this aspect.

In Baden-Württemberg, you only use the land. Buildings built on them are therefore initially of no importance at this level of the calculations for property tax in Baden-Württemberg. However, the state government invokes precisely this aspect when it claims that its own state property tax law represents a clear simplification compared to the previous, but also the new procedure for collecting property tax at federal level. While the objective valuation of buildings can in most cases be quite contrary, the valuation of land is relatively simple. The municipal expert committees are used for this purpose. These in turn proceed in their evaluation according to the requirements of the first part of the third chapter of the Building Code (§§ 192 ff. BauGB). Because the specifications for determining the soil guideline are regulated there.

In future, all valuations of the taxable properties in Baden-Württemberg will be based on these land guidelines resulting from expert reports.

With the thus determined soil benchmark, the financial administration now performs a multiplication. For this purpose, a control measurement number is used as a further factor. In general, a tax reading for real estate of 1.3 ‰ is provided. In this way, the tax administration determines the property tax measurement amount, which it communicates to both taxpayers and the respective lifting municipalities by means of a declaratory decision.

But the Land Grundsteuergesetz also provides for some modifications to the tax measure. The most important of these is given in a development with residential buildings. This includes buildings that are mainly used for residential purposes. This is therefore likely to be relevant for real estate that, for example, combines a shop and one or more residential units under one roof. Specifically, the respective usable areas are assumed here from a comparison. Which usable area is the larger in this case determines the control measurement number to be used.

A further regulation for the reduction of the measured tax figure is provided for when applied to subsidized housing. In this case, the general measurement figure is to be used with a reduction of 25%.

A reduction of 10% to the regular tax number takes place in the case of a building with a state-approved monument.

An important point here is that the reductions adopted are cumulative. For example, a monument used for residential purposes grants a 35 % reduced approach to the tax figure for property tax. Effectively, 65% of 1.3 ‰ (= 0.845 ‰) would be used.

On the thus determined property tax measured amount, the cities and municipalities then collect their property tax. For this purpose, the municipalities multiply the land tax measurement amount by their lifting load.

Finally, information should follow that includes the exceptions to a collection of property tax in Baden-Württemberg. In fact, the list of exceptional cases and the reasons for a tax exemption is very extensive, but they are always exceptional cases that have no meaning for most taxable property owners in Baden-Württemberg. However, there are also some exceptions to the exceptions, which we will only go into a few more details.

The LGrStG provides for exemptions from taxation initially for land owned by legal entities governed by public law. This includes land under publicly recognized religious societies and used for the promotion of faith, science or education and some other related purposes. However, an exception to this exception is land owned by professional associations or other professional associations governed by public law. This then accrues property tax in Baden-Württemberg. Furthermore, properties of the Bundeseisenbahnvermögen are also exempt from taxation if they fulfil administrative tasks as a purpose. Furthermore, real estate owned by an association or a private-law corporation or comparable legal entities that have committed themselves solely to a charitable or charitable purpose is also exempt from property tax in Baden-Württemberg. Also, certain hospitals and real estate serving scientific teaching and research should not generate a property tax.

In addition, tax exemptions also apply to land that provides a public transport infrastructure service. In addition to roads, this includes airports, rails, waterways and land intended for related tasks. In addition, certain properties that can be assigned to the water industry, such as dikes, are also exempt from property tax.

Finally, certain residential buildings also enjoy a tax relief. This applies, for example, to accommodation of the police, the Bundeswehr and other armed forces as well as those that go hand in hand with education or training.

For the purpose of determining property tax A in Baden-Württemberg, no residential buildings standing on land attributable to an agricultural and forestry enterprise count. For residential buildings of this type, the normal regulations apply. For the determination of property tax A, other assets that are not directly related to the property (for example, financial assets, livestock) play primarily no role.

So when calculating the property tax for agricultural and forestry enterprises, it basically only depends on the respective properties that have a connection to agriculture and forestry in one form or another. In addition to the areas used for the cultivation and harvesting of agricultural products, these include forests, vineyards, fish ponds and brownfields, to name but a few examples.

In order to determine the tax base for property tax A, one has to use the income value of the area subject to a certain use. This requires multiplying the areas with units of value per type of use and area as well as some other factors (surcharges) for which the LGrStG attachments provide specific information. This gives an area value for a specific use. The sum of the land values of an agricultural and forestry holding then serves as net income for the further calculation of the property tax.

Subsequently, a capitalization of net income takes place. The net yield is multiplied by a capitalization factor of 18.6. This step then produces the basic control value.

In this regard, it must be mentioned that gardens are also covered by the regulations for the collection of property tax A. And also for this purpose, a separate evaluation factor for the calculation of the yield values is provided in the plants.

Finally, we come to the determination of the property tax measurement amount. For this purpose, the basic control value is again multiplied by the control measurement number. In this case, 0.55‰ is specified as the control measurement number. This gives agricultural and forestry enterprises (as well as allotments) a tax advantage of 0.75 ‰.

The property tax measurement amount determined in this way then serves the municipalities entitled to collect for the further calculation of the property tax A due to them.

In fact, the application of the new regulations for collecting property tax in Baden-Württemberg can in most cases be perceived as a simplification. However, there are also very many exceptions that require a closer examination. Whether, however, as previously assured, the new property tax in Baden-Württemberg goes hand in hand without a general increase in property tax, will not be known until 2025.

Furthermore, lawyers have dealt with the Land Grundsteuergesetz. They see a number of points as conflicting with the national constitution. This could possibly lead to some changes in the collection of property tax in Baden-Württemberg.