As stipulated by the Federal Constitutional Court, Bundestag and Bundesrat should decide on the property tax reform by the end of this year. Since the annual property tax is an important source of income for municipalities, an agreement in the given timeframe was mandatory for the governing parties. The newly calculated property tax assessments will be sent out for the first time in January 2025. The federal government therefore has five years to collect new data for calculating the property tax rate for property owners. Owners who do not use their real estate themselves can transfer the property tax over the operating costs to the tenants. At very good to good locations annual additional costs of 50 Euro are expected from 2025 on.
States will get more competences
Currently, the income via the property tax is at around 14 billion euros. For infrastructural weaker cities and communities, it is the main source of income, for example to renovate schools, maintain roads and build playgrounds. According to the new property tax law, the tax rate is to be calculated on the basis of the type of property, the year of construction, the plot size, the land value and the rent level. States will also get additional authorisations to change the weighting of criteria so that annual revenues remain at current levels. For the expansion of country competence, a constitutional amendment is necessary. Since a two-thirds majority in the Bundestag and Bundesrat must be achieved, the exact parameters of the property tax reform were negotiated for a long time. The goal was to present a law, that will also satisfy the opposition.
Residential constructions will be promoted
The new property tax law also aims to enable municipalities to charge real estate owners a higher tax rate, the so called “property tax C”, if land remains unused. Specifically, this means that municipalities can punish it in the future, if construction projects are not driven forward by the developers or real estate is not used due to an expected price increase. Above all, cities and municipalities with very high housing requirements hope that the new law will help to ease housing shortages.
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