Is the Grundsteuer (real property tax) constitutional?
One of the most important sources of revenue for German municipalities is the Grundsteuer, which generates annual receipts of approximately EUR 13 billion. However, the taxation of the currently applied standard assessed values is still based on value parameters from 1964 for West Germany and from 1935 for East Germany.
According to the BFH, the standard assessment of real property violates the general principle of equality, and the court takes the view that the Grundsteuer has therefore been unconstitutional since 1 January 2008 at the latest.
The Bundesverfassungsgericht (Federal Constitutional Court) already held an oral hearing on the question of whether the Grundsteuer is constitutional on 16 January 2018. Unfortunately, we have to wait until 10 April 2018 for the judgment to be announced. We will of course inform you immediately once the decision has been published. Until then, all we can do is wait and hope.
Frequently asked questions
Frequently asked questions
What is the current calculation of property tax (Grundsteuer) in Germany based on?
Grundsteuer is calculated on the basis of standard assessed values (Einheitswerte), which reflect market conditions from 1964 in West Germany and from 1935 in East Germany. These outdated valuation parameters cause significant distortions between the actual market value and the taxable base.
Why does the Bundesfinanzhof consider the real property tax unconstitutional?
The Bundesfinanzhof (Federal Fiscal Court) regards the standard valuation of real property as a violation of the general principle of equality under Art. 3 of the Basic Law. In its view, the real property tax has been unconstitutional since at least 01.01.2008, as the outdated values lead to unequal taxation of comparable properties.
What is the significance of property tax for German municipalities?
Property tax (Grundsteuer) is one of the most important sources of revenue for municipalities, generating around EUR 13 billion annually. Any finding of unconstitutionality would therefore have a significant impact on municipal budgets and would necessitate legislative reform.
When will the Federal Constitutional Court rule on the constitutionality of the property tax?
The Federal Constitutional Court held the oral hearing on the constitutionality of the property tax on 16 January 2018. The judgment is scheduled to be announced on 10 April 2018.