Between July and October, property owners must submit data for the recalculation of their property tax. This affects all developed and undeveloped properties, including office buildings, apartment buildings, single-family homes, farmland, and warehouses.
Calculating the usable floor space can be complicated if the data available is outdated or incomplete. Professional real estate agents and property managers can help.
Data collection for the recalculation of property tax will begin on July 1. This affects all owners of offices, apartments, etc. Nationwide, approximately 36 million developed and undeveloped properties will have to be recalculated. The data must be entered online in the ELSTER tax portal in the "Declaration for determining the property tax value." The recalculation of this tax is necessary because the Federal Constitutional Court criticized the previous practice in 2018. Until now, standard values from 1964 and 1935 were used for the calculation.
Although the recalculation will not affect tax assessments until 2025, data must be collected now because it takes so long for the tax authorities and local governments to determine the new values. The bottom line is that the tax burden on all property owners will remain unchanged. However, the tax levy is likely to rise slightly in urban areas, while declining in rural regions. It is not yet possible to predict the exact tax burden. This is not least because it also includes a municipal assessment rate, which is set individually by each municipality. Therefore, there are no sample calculations.
As has been the case up to now, property tax can also be passed on to residential tenants in accordance with the Operating Costs Ordinance. However, this cost item must be agreed in advance in the residential lease agreement. It is also common practice in commercial lease agreements to pass on property tax to the users.
Some federal states with their own calculation methods
The federal states differ in their calculation of property tax and the type of data required. While North Rhine-Westphalia (NRW) adheres to the so-called federal model, which most federal states follow, others such as Hamburg, Saxony, Bavaria, and Baden-Württemberg use an opening clause in the reform package to apply their own calculation model. "Owners and investors who own real estate in several federal states should be aware of this and take it into account," explains Uwe Mortag, managing director of Larbig & Mortag Immobilien in Cologne. The company specializes in real estate consulting and brokerage for office properties, commercial investments, retail and restaurant space, and hall rentals, among other things.
In some federal states, including North Rhine-Westphalia, owners are notified in advance by letter and requested to submit their data between July 1 and October 31. In some cases, the letters contain the building data available to the relevant tax office. This data must be checked by the owners, updated if necessary, and then entered into the corresponding ELSTER form.
The federal model requests information such as the year of construction, the size, i.e., the living and usable space, the outdoor areas, the type of use, and the standard land value. "In addition to the owners themselves, their tax advisor and property management company can also transfer the data on their behalf," says real estate expert Mortag. Other real estate service providers may assist with data research and any necessary recalculation of the areas. However, they are not permitted to transfer any data on behalf of the owner.
Different calculation methods depending on the use of the building
The devil is in the details, especially when it comes to the required space specifications: Living space must be calculated in accordance with the 2003 Living Space Ordinance. For commercial space, information must be provided based on the gross floor area (GFA). There are several things to bear in mind here: The Living Space Ordinance has a number of special features regarding the calculation of balconies, sloping roofs, and baseboards. Determining the GFA for commercial use is hardly less complicated. Calculating the external dimensions of the building can be laborious: the insulation and plaster layer or a multi-shell wall construction. The BFG method excludes basement shafts, external staircases, and unusable roof areas. Technical rooms are also not included in the calculation.
"While this data is up to date and complete for newer and professionally managed buildings, there are gaps and inaccuracies, especially in older properties," points out real estate service provider Mortag. As a result, the floor space specified in contracts may not meet the requirements of the property tax reform. Changes have also frequently been made that are not reflected in the building documents. In residential buildings, this could be a roof extension, while in commercial properties it could be additions to the property, changes in use, or floor plan adjustments, such as the installation of additional toilets or the enlargement of a utility room. "Owners who are unsure about this data should contact their management company or an architect. In such cases, our company offers to have the areas remeasured by an expert. This will give owners peace of mind. Owners should commission this work in good time, as architects and surveyors are currently very busy," explains Mortag.
Another sticking point is the year of construction. This determines the remaining useful life, which is also relevant for the new property tax. If the building has undergone extensive renovation in the meantime, including replacement of the roof, insulation of the facade, and other measures, this increases the value of the property. At the same time, the useful life is extended.
Owners should already plan the necessary time for data preparation in the third quarter of 2022 and contact the relevant service providers. This will allow the data to be transferred relatively quickly.
