Property tax rate changes! There are tax havens here too!
Property tax is currently THE ongoing issue in Germany!
Of course, we would also like to keep you up to date on this. This blog post is about the new assessment rates and the assessment rates that many municipalities have already wisely adjusted before the new property tax. Many municipalities and cities have already drastically increased their rates in 2022. This is how municipalities and cities are replenishing their empty coffers, just like with trade tax.
The changes in the collection rate in Germany in 2022
However, there are also exceptions here, both negative and positive. The property tax portal LAMA has compiled an analysis of how the assessment rates have changed in 2022. You can find the link to the analysis here: Assessment rate changes in Germany 2022
The overview is shown as a percentage and starts with the most reduced rates. In this case, the town of Hünfeld in Hesse is the front runner and has reduced its rates by 50%, now at 150%. By way of comparison, the town of Kefenrod in Hesse has increased its assessment rate by 88% to 850% for property tax B. Perhaps your municipality or town is also listed?
All cities and municipalities not included in the list did not change their assessment rates between 2021 and 2022.
The trouble with the collection rates
There is a lot of anger about the already changed rates of assessment. Many municipalities will only adjust their rates after the recalculation. Some municipalities are already calculating a drastic increase. Incidentally, the current frontrunner with a collection rate of 1,050% is still the town of Lorch in Hesse. But it gets even worse! The municipality of Alfter in North Rhine-Westphalia is already planning to increase its assessment rate from the current 763% to 1,500% in 2024 and 1,800% in 2027. In this context, one can already speak of disproportionality.
The tax havens
There are and always have been tax havens in Germany. For the most part, the term “tax haven” usually refers to trade tax. Such tax havens are usually found on the outskirts of conurbations or large cities. Why is that? Quite simply! These cities or municipalities have trade tax rates that are far below the national average, and yet they collect a lot of taxes due to the mass of companies that settle there. And here comes the reference to property tax: you cannot generalize that these cities and municipalities generally have a lower assessment rate for property tax. However, this is often lower than the national average. However, there are also small property tax havens. These are a few small villages in Rhineland-Palatinate and Schleswig-Holstein that do not levy any property tax at all. These villages have a balanced budget and can afford to do without property tax. This is because wind turbines generate additional income in these municipalities. And the municipalities therefore do not burden their citizens with property tax.
Objection in any case
As you may know, we explain many documents and topics related to PepperPapers on our TaxPro YouTube channel. We also receive a lot of questions about this. With regard to property tax, for example, we are asked again and again: “Do I also have to submit the sample objection to the tax office’s property tax assessment if the amount measured is lower than before?” The answer here is quite clear: you should definitely lodge the objection! This is because the property tax to be paid depends not only on the assessment rate of your municipality, but also on the property tax assessment amount and the property tax value. You have to pay the property tax set by your municipality. Unfortunately, there is no way around this. However, it is not yet clear whether the new property tax is unconstitutional. You should therefore protect yourself with the sample objection, even if the tax office’s assessment is lower than the last assessment. Because if the municipal assessment rate increases in the future, it will be more expensive than previously assumed.
Conclusion
Germany is undergoing major changes with regard to all the property tax changes. Should you therefore make your decision to buy a property dependent on the respective assessment rates? There is no clear yes or no here. Are you already planning to buy your own property? Then you should wait for a possible reduction in real estate transfer tax. You can find the relevant video here: Real estate transfer tax (stupidity tax) about to end? THESE are the plans!
