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

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 (this contribution)

From 2025, the determination of property tax in Lower Saxony is to be based on the so-called area-location model. As one of seven federal states, Lower Saxony is thus also embarking on its own path to taxing property as part of the property tax reform. For this purpose, a factor is used which is based on the ratio of the land reference value of the property to be taxed to the corresponding average value of all the properties of the municipality to which it belongs. This includes both reductions for architectural monuments and for social housing. However, the design of the Lower Saxony Property Tax Act also took into account a tax reduction for large-scale properties. On the other hand, the collection of property tax A for agricultural and forestry enterprises generally follows the requirements of the general property tax law.

Since in 2018 the Federal Constitutional Court ruled that the current collection of property tax is unconstitutional, the legislature had to reform the property tax law and the assessment law. According to the court, however, this only remained until the end of 2019. In addition, it was controversial how the municipalities should collect the property tax in the future. In fact, there were several ideas about this, in particular with a view to simplifying the procedure for taxpayers and administration. Finally, the federal government submitted a bill that was strongly based on the previous regulations.

But some federal states that favored other taxation procedures threatened to reject this bill in the Bundesrat. Thus, the tight timetable for the timely adoption of the reformed property tax law was at stake. Because if the legislature had exceeded the deadline of the judges, then all cities and municipalities in Germany would have been allowed to collect at least for 2020 no more property tax. And since the property tax is an important cornerstone in the financing of most municipalities, the removal of this source of finance would have had serious consequences.

Therefore, all actors agreed on a compromise. Through an opening clause, which was inserted into the Basic Law, it was open to the federal states to make their own regulation as an alternative to the general property tax law.

Lower Saxony was also one of seven federal states to opt for this option. What regulations have been made in detail in Lower Saxony regarding the collection of property tax, should now be the content of this article.

The primary legal basis for the future determination of property tax in Lower Saxony is the Lower Saxony Property Tax Act (NGrStG). Divided into three parts, 15 paragraphs regulate the peculiarities according to which, in particular, the valuation of real estate in Lower Saxony is to take place.

§§ 2 to 7 NGrStG in particular are relevant here. They also form the first chapter of the first part of the NGrStG (real estate, property tax B). § 7 NGrStG is particularly noteworthy because it stipulates that the lifting cities and municipalities should keep the new property tax revenue-neutral from 2025. However, they still have the right to determine their own lifting rates. However, the second chapter of the first part deals with procedural rules. The second chapter thus covers questions relating to the assessment procedure, the assessment procedure and rules for a waiver in the event of a material reduction in income.

The second part of the Act relates to property tax A, which concerns agricultural and forestry enterprises. This part consists solely of § 11 NGrStG. It deals with the regulations deviating from the general property tax law.

In the third part we find transitional and final rules. This also includes the regulations for the period until the end of 2024. § 14 NGrStG is also interesting, because it contains the provision that the responsible Ministry of Finance must carry out an evaluation of the burden distribution of property tax in Lower Saxony by the end of 2027.

Now let’s get to the details of the collection of property tax B in Lower Saxony, as it should be done from 2025. An area-location model should be the basis for the valuation of land and other real estate. This is done in three stages in order to calculate the relevant tax amount used by the municipalities for determining the property tax on their lifting rate.

3.1.1. Calculation of the equivalent amount

First of all, the equivalence amounts are calculated separately for land and for any buildings built on it. For this purpose, the respective area is multiplied by the equivalent number specified in § 4 NGrStG and the location factor according to § 5 NGrStG. For buildings, a uniform equivalent of EUR 0.50 per square metre applies. For plots of land, you have to differentiate to determine the equivalence number. If a plot of land is at least 90% neither built nor fortified, then you have to choose the following approach for plots over 10,000 m2:

(exceeding land area in m2 x EUR 0,04/m2)0.7

However, if a building exists on land serving at least 90 % of its residential purpose, a 50 % reduction is envisaged for land exceeding 10 times the residential area.

Furthermore, you have to determine the position factor. This is a comparative value in which the value deviation of the land indicative value of a plot of land relative to the average of all land indicative values in the municipality in which the land under assessment is located is determined. The following formula shall apply:

(land indicative value of land / average land indicative value in the municipality)0.3 = location factor

The municipal expert committees determine the soil guidelines. For this purpose, in Lower Saxony, the land reference values of all properties should be available online from 31.05.2022 at the latest.

3.1.2. Calculation of the basic tax measurement amount

With the equivalence amount for land and the possible equivalence amounts for building areas, one then enters into the calculation of the property tax measurement amount. In this case, the respective equivalence amounts are multiplied by a specific control measurement number. In general, a control measurement number of 100% should serve for this purpose. However, a reduced metric of 70 % is applied when multiplying by equivalence amounts of residential buildings. If this applies to a residential building that is in close spatial relation to an agricultural and forestry company, then the tax reading should be reduced by another 25 %. The Lower Saxony Property Tax Act also provides for a 25 % reduction in the tax figure for building monuments. It is also not surprising that a corresponding reduction of 25% is also provided for social housing.

Subsequently, the results of applying the control measure(s) to the equivalence amounts are combined in a sum. In this way, the basic control measurement amount is obtained.

3.1.3. Calculation of property tax by application of the lifting rate

The third and final step then takes place at the municipal level. In contrast, the previous calculations are solely subject to the tax administration, which also announces the property tax measurement amounts. On this basis, the lifting cities and municipalities then calculate the property tax in their administrative units.

With regard to property tax A, Lower Saxony wishes in principle to follow the provisions of the general property tax law. The only deviations from the Property Tax Act or the Valuation Act concern aspects that are only relevant in certain exceptional cases.

With a conclusion, we want to conclude our report on property tax in Lower Saxony, as it should apply from 2025. On the one hand, we can state that the calculation of the property tax in Lower Saxony based on the area-location model will certainly lead to clear deviations from the general procedure. But whether this then also leads to a higher or lower property tax in Lower Saxony, can currently only insufficiently estimated. After all, this also depends largely on the amount of the respective lifting rate that the respective municipality determines. Whether the cities and municipalities of Lower Saxony adhere to the guidelines and make the new property tax revenue-neutral from 2025 is currently uncertain. At least they still have the right to determine the lifting rates themselves. Therefore, it is conceivable that they also use it in relation to the collection of the property tax 2025.

Some aspects of the new regulations on property tax in Lower Saxony are nevertheless remarkable. On the one hand, the instruction for dealing with large-scale plots corresponds to those that are favored in Bavaria, but have not been introduced in any other federal state. On the other hand, the position factor in Lower Saxony corresponds to the specifications that Hessen also uses in its area-factor method. In any case, this is an interesting combination. At least this leads to the question: who has coppered off from whom?