BFH considers federal property tax model to be constitutional – but the decision is not yet the last word

Federal Fiscal Court, judgments of 10.12.2025 (II R 25/24, II R 31/24, II R 3/25)

In three rulings dated December 10, 2025, the Federal Fiscal Court (BFH) decided that the so-called federal model of property tax – specifically the capitalized earnings value method for residential property – is constitutional. The BFH thus largely rejected the appeals of apartment owners from North Rhine-Westphalia, Saxony and Berlin.

This is sobering for many property owners. However, the property tax is by no means legally settled.
The plaintiffs have already announced that they will appeal to the Federal Constitutional Court (BVerfG).

Especially for all those who have purchased or continue to use legal documents on property tax via PepperPapers, it is now important: These BFH rulings are only an interim stage.

What were the three BFH proceedings about?

The lawsuit was brought by homeowners from federal states with a federal model:

• II R 25/24: Rented 54 sqm apartment in Cologne (old building, good location)

• II R 31/24: Owner-occupied 70 sqm apartment in Saxony (built in 1995)

• II R 3/25: Rented 58 sqm apartment in Berlin (old building, simple location)

In all cases, the property tax value as at 01.01.2022 was determined using the capitalized earnings value method and has served as the basis for the new property tax since 01.01.2025.

The plaintiffs complained, inter alia:

• Violations against Art. 3 para. 1 GG (principle of equality)

• an incorrect legislative competence of the federal government

• Excessive standardization and flat rates (standard land values, net cold rents)

The decision of the BFH – technical court, not constitutional court

The Federal Fiscal Court did not see any profound constitutional doubts and therefore rejected a referral to the Federal Constitutional Court in accordance with Art. 100 GG.

Formal: competence of the federal government affirmed

The BFH considers the Property Tax Reform Act to be formally constitutional.
Even if the legislator has not fully exhausted its scope of action, this does not lead to unconstitutionality.

Material: Flat-rate payments still permissible

In the opinion of the BFH, the legislator may:

• strongly typify to enable an automated mass procedure

• Use standard land values as average values

• apply flat-rate net cold rents, even if they do not accurately reflect real differences

Moreover, the property tax value is only a calculation parameter, the effects of which are further weakened by the measurement figure and assessment rate.

This is crucial for PepperPapers customers:

These judgments do not apply to all federal states

The current BFH rulings apply exclusively to states that apply the federal model, including, among others:

Brandenburg, Bremen, Mecklenburg-Western Pomerania, North Rhine-Westphalia, Rhineland-Palatinate, Saxony, Saxony-Anhalt, Saarland, Schleswig-Holstein, Thuringia and Berlin.

However, the rulings have no direct impact on:

• Baden-Württemberg

• Bavaria

• Hamburg

• Hesse

• Lower Saxony

These countries apply their own property tax models.
The constitutional issues there are different in terms of content – and have not yet been decided by the highest court.

Looking ahead: BFH negotiates country models from 2026

Particularly important for PepperPapers customers:
The BFH itself has already announced that it will deal intensively with the country models in 2026.

🔎 O ral negotiations on the Baden-Württemberg model are planned, probably in April 2026.

This means:

• Overall, property tax is still on the move

• Owners in countries with special models should also secure their rights

• The overall constitutional assessment is still pending

Why objections and legal documents are still useful

Neither the BFH rulings nor current property tax assessments preclude subsequent successes.
On the contrary:

• The Federal Constitutional Court decides independently

• The practical effects since 2025 play a major role there

• Anyone who has not lodged an objection now can no longer benefit later

For PepperPapers customers, this means in concrete terms:

• Your objections and applications are not wasted effort

• They secure your procedural position

• They keep your path open in case Karlsruhe (partially) overturns the property tax

PepperPapers documents are designed to do just that:
Secure rights, meet deadlines, document arguments clearly.

Conclusion: Not the end – but the start of the next round

The BFH rulings of 10.12.2025 are not the end of the property tax debate.
They are a determination of the position by the specialist courts, not a constitutional decision.

• Federal model: negotiated – but not yet conclusively clarified

• Country models: to be put to the test in 2026

• Federal Constitutional Court: not yet involved

👉 Those who stick with it now will have the better cards later.

Source:
Federal Fiscal Court, press release no. 078/25 dated 10.12.2025
(II R 25/24, II R 31/24, II R 3/25)