If households have already received the property tax notice, they at least know the newly determined property tax value. However, no statement regarding the amount of property tax can be derived from this. This is because, according to the regional finance directorate in Frankfurt, the new calculation types in the municipalities have not yet been determined. These will only be determined at the national level at the end of this year.

But that could take a little longer because state governments are protesting the impending property tax price shock. According to estimates by the Association of Cities and Municipalities based on a sample, private property owners must pay 20 percent more, while commercial properties are exempted up to 50 percent.

The association of cities and municipalities in North Rhine-Westphalia had previously warned of a heavy additional burden. “The calculations in the municipalities are already underway. And they point out a big drawback: according to the figures measured so far, this is a massive change to the detriment of private owners,” said the president of the association, Christoph Landscheidt, mayor of the city of Kamp-Lintfort. Residential properties would be significantly more burdened than commercial properties. He couldn't stay like this. “In my opinion, any additional burden on citizens can no longer be justified.”

The opening clause aims to expand the scope of the municipalities

That is why a legal opening clause should now apply to the controversial property tax reform, said NRW Finance Minister Marcus Optendrenk (CDU) in an interview with the Frankfurter Allgemeine Zeitung (FAZ) newspaper. As chairman of the Finance Committee of the Federal Council, he and Rhineland-Palatinate department head and chair of the Conference of Finance Ministers Doris Ahnen (SPD) wrote a letter to Federal Finance Minister Christian Lindner (FDP) , asking for the corresponding change. . The state finance ministers make the corresponding decision by a large majority. With almost 18 million inhabitants, North Rhine-Westphalia is the most populous and densely populated state in Germany. However, the regulation could also apply to other federated states.

But what exactly is the proposal? Municipalities should be able to differentiate property tax rates for residential and commercial areas on a regional basis to absorb disproportionate changes in tax burdens. This gives municipalities more decision-making latitude and they can, when necessary and desired, adjust rates so that “there is no excessive burden on residential properties,” says Optendrenk. The distribution of income between residential and commercial properties varies greatly from community to community. Municipalities could protect private households from price shocks through differentiated tax rates.

Specifically, it is the property tax B. It is applied to urbanized and buildable land and is paid by the owners or transferred to the tenants. Property tax A applies to agricultural businesses. Municipalities maintain uniform national metrics for businesses and individuals. It is a “simple solution”, as stated by the general director of the City Council, Helmut Dedy.

Property tax reform: Is the proposal too late?

Time is of the essence, which is why many experts push for quick decisions. “The goal is for cities and municipalities to be able to send new property tax settlements to owners in 2024,” says Uwe Zimmermann, Deputy CEO of the German Association of Cities and Municipalities, in response to a question from FOCUS online. The prerequisite is that municipalities receive, if possible, all the results of the property revaluation from the tax offices of the state tax administration in the first half of 2024. And further: “Only then can cities and municipalities start to redefine the property tax assessment rate and, on this basis, introduce new property tax assessments.”

In the coming months, municipalities will also receive a software update with which they will be able to send final property tax notices. Authorities rely on manufacturers to deliver on time. The city administrator sees another problem in the differentiation of tax rates. “The legal risks are great because any differentiation in assessment rates must be constitutionally justified,” he told FAZ.

Households must reevaluate their property every seven years.

On April 10, 2018, the Federal Constitutional Court decided that the previous method of calculating property tax is no longer valid. To implement this ruling, the federal government has launched property tax reform, which is enshrined in three new laws.

• The first law concerns the revaluation of all properties in Germany from January 1, 2022: owners had to submit an electronic declaration to the tax office about the value of their property. Now they have to repeat it every seven years. Because the property has to be reevaluated again and again.
• The second law allows municipalities to tax more non-developable but buildable land starting in 2025 to promote the development of these areas.
• The third law modifies the Basic Law to establish the federal government's responsibility for property taxes, but leaves it up to the states to regulate them themselves. Five states have taken advantage of this option and introduced their own regulations, while Saarland and Saxony basically follow the federal model, but have set their own tax figures.