Property owners are required to file a property tax return by October 31, 2022. Read here what happens next, how the property tax will be calculated in the future and what the consequences are if no property tax return is submitted.
After the first onslaught, which brought the Elster tax platform to its knees at the beginning of July, the submission of the property tax return is now in full swing and the owners of the approximately 36 million residential buildings, plots of land and non-residential buildings in Germany have to submit a declaration to the tax office to determine the value of the property.
Basics: Who has to submit a property tax return?
The owner of the property is obliged to submit the property tax return. It does not matter how the property is used or whether it is built on. If the house or apartment is rented out, the owner remains liable for the tax. The tenant has nothing to do with the property tax return itself.
If there are several owners, for example if spouses own a house together, it is sufficient if one of the co-owners submits the declaration. However, the other co-owners must be named in the declaration. If a plot of land is encumbered with a heritable building right, the duty to pay exists exceptionally for the person entitled to heritable building rights. However, the party obligated to build heritable property, i.e. the property owner, must participate in the declaration.
Attention - the obligation to pay the fee also applies to changes of ownership after January 1, 2022
Anyone who has sold or will sell their house after January 1, 2022 is still responsible for filing the property tax return. Because what counts is the ownership structure as of January 1, 2022. What happens after that is initially irrelevant for the obligation to pay the fee.
In principle, the new owner does not have to submit a property tax return, nor does he have to do anything else. The tax office takes action on its own initiative and learns of a sale from the notary's report.
Something else applies if the property owner dies before he has been able to submit the property tax return. In this case, the heir or heirs are obliged to pay.
What happens after filing the property tax return?
The tax office uses the information in the property tax return to calculate the property tax value and informs the owner of this in a notification.
Owners receive a further notification from the tax office about the real estate tax base amount. This is determined from the property tax value and the tax index. The tax office also reports the property tax amount to the municipality in which the property is located. This requires the property tax base amount for the calculation of the property tax to be paid.
These processes result in a number of notifications that owners will receive in the next one to two years: First, the tax office will send out the notification on the determination of the property tax value (property tax value notification), probably from autumn 2022 to 2023. Also expected from autumn 2022 to 2023 will be the decision on the determination of the property tax amount (property tax amount notice). And finally, probably in the course of 2024, after the new assessment rates have been determined, the municipalities will send out the new property tax assessments.
When will the newly calculated property tax be due?
From 2025, property owners will then have to pay the newly calculated property tax. The property tax values are to be reassessed every seven years in the future. The tax office uses the value at the beginning of the year at these main assessment times.
The new valuation procedure is designed in such a way that new property tax values can be determined as automatically as possible. Only in the case of a change in use, in the case of extensions or conversions and in the event of changes in ownership, more extensive information will be required in the future.
Despite these plans for the new assessment process, it may be necessary to carry out an assessment before the end of the seven years. This applies, for example, if the value of the property has changed by more than EUR 50,000, there has been a change of ownership, or an error in the last assessment needs to be corrected.
It's getting down to business: How will property tax be calculated in the future?
The calculation of the property tax is basically carried out in three steps:
Step 1: Determination of the property tax value.
Step 2: Applying the tax base number to the property tax value and calculating the tax base amount. The tax index is set by law and depends on whether and how the property is developed and for what purpose it is used. The tax office calculates the tax base amount and communicates it to the owner of the property. At the same time, the tax office informs the municipality about the amount of the tax base. Because the municipality needs the tax amount for the further calculation of the property tax.
Step 3: Applying the assessment rate to the tax base amount and calculating the property tax. The amount of the multiplier is not specified by law, each municipality may set the multiplier for its area individually. The currently applicable assessment rates will be adjusted by the municipalities for the newly calculated property tax from 2025. The calculation is therefore based on the formula: property tax value × tax index × assessment rate = property tax
The federal model and the state models differ primarily in step 1 of the calculation, i.e. when determining the property tax value. Basically, the three-stage calculation method also applies in the federal states with their own model - with small deviations in detail.
What happens if no property tax return is submitted?
First, the tax office will remind you to submit the property tax return and threaten the "penalty". At the latest now you should take action and submit the property tax return.
Anyone who still does not submit the property tax return risks a fine of up to 25,000 euros. In addition, the tax office may estimate the basis of taxation if no property tax return is submitted: it then estimates, for example, the living space or the number of garage spaces - although the estimate is certainly not in favor of the owner.
Actually, the tax office is also obliged to set a late fee if the declaration is not received or is received late. As part of the first main determination as of January 1, 2022, the mandatory determination of the late payment penalty is exceptionally omitted.
If the property owner does not fulfill his obligation to pay the tax, the tax office may, at its own discretion, impose a surcharge for late payment. The amount of the late payment penalty then depends on how long the deadline has been exceeded.
Maike Backhaus is a tax expert at Wolters Kluwer's Steuertipps.de portal.
(This article was first published on Sunday, August 07, 2022.)