What is this all about?
Property owners have to pay property tax to the municipalities. Basis of assessment for the property tax and thus the value of a property has so far been the so-called rateable value, which usually has been determined on 1 January 1964 or 1 January 1935. In the course of time, these rateable values have occasionally been adjusted to current values, for example in the case of changes of ownership or newly constructed buildings. On 10 April 2018, the Federal Constitutional Court ruled that these differing valuations of the properties therefore violated the requirement of equal treatment under the constitutional law and that the legislature had to introduce a new regulation up to the end of 2019. The legislature then implemented this (with the Property Tax Reform Act of 26 November 2019 and the Property Tax Reform Implementation Act of 25 June 2021).
As things stand today, the property tax fixed newly will be payable from 2025 onwards. In the period from the submission of the declarations in 2022 up to 1 January 2025, the local tax offices will issue the assessment notices on the new property values and tax assessment amounts. In addition, the municipalities will, if necessary, redefine their assessment rates.
Does this actually affect me too and will property tax become more expensive for me?
The assessment tax return with the recalculated property values have to be submitted by any owner even if potentially requirements for release from property tax are met. General estimates assume about 36 million properties (single-family houses, condominiums, multi-family houses, business properties, agricultural and forestry real estates, etc.) for which a recalculation has to be made.
The legislator's goal was to implement a revenue-neutral property tax reform. Accordingly, it is intended that this reform will not increase the total property tax payable by all taxpayers. However, depending on individual circumstances, some taxpayers may have to pay a higher property tax and others a lower one.
How are the property tax and the property value calculated?
The property tax will be calculated as follows: New property tax value multiplied with tax rate (fixed by the local tax office) multiplied with assessment rate (fixed by the municipalities).
As a basis or assessment basis for the property tax, the rateable value is now replaced by the property tax value, which is basically to be calculated according to the so-called federal model.
According to the federal model, the property tax value for undeveloped land is calculated from the land area and the standard land value, which is provided by an expert committee and can be retrieved. For developed land, the land tax value is calculated either according to the capitalised earnings value method (for example, for rented residential land or single-family or two-family houses) or according to the asset value method (for example, for mixed-use land or commercial property).
The basic data for the capitalized earnings method are essentially the age of the building, the living space, a flat-rate standard rent, the land area and the standard land value. The basic data for the asset value method are the standard production cost, the gross floor area and the age of the building as well as the land area and the standard land value.
However, an opening clause was included into law, according to which the federal states were granted the right to enact rules for the valuation of land that deviates from this federal model. Various federal states have subsequently made use of this possibility by deviating or modified valuation models. Therefore, in addition to the federal model, there are also the land value model and the area factor model.
Which documents are needed?
As initial documents, we recommend compiling the basic data listed above. The previous rateable value determinations, site plans, cadastral extracts and calculation documents from architects as well as purchase contracts can be helpful for this. Required information on the property includes, for example, the exact location (address, district and parcel), the respective area, the ownership structure and the type of property. Some of these can be found in the extracts from the land register. If these are not available, we recommend an early application for delivery, since the processing time of the land registry can also be delayed due to the volume of enquiries.