Germany is facing a property tax crisis: millions of undeclared advertisements and new challenges on the horizon

Recently, a period for submitting land tax declarations lasted for several months, and there are still millions of outstanding declarations yet to be paid in the country. This article addresses a critical question regarding this matter, but the answer may take more time.

After nearly six months since the deadline for submitting property tax declarations in most German federal states has passed, there are still several million declarations missing in Germany.

This is what was revealed by a survey conducted by the German Press Agency (Deutsche Presse-Agentur) with 16 state finance ministries. In case advertisements are not received even after sending reminders, the values will be estimated, and those who are late may be subject to penalties for the delay, as announced by some federal states.

Alone in North Rhine-Westphalia state, around 600,000 land tax declarations are still missing, with over 90 percent already submitted up to now.

In the state of Bavaria, around 500,000 advertisements are still missing, in Lower Saxony state over 200,000, in Thuringia approximately 150,000, in Berlin about 90,000, in Saarland around 64,000, and in Mecklenburg-Western Pomerania around 25,000.

The application rate in many federal states is over 90 percent, and in Baden-Württemberg, it is around 86 percent. These percentages can be challenging to compare at times.

In Hamburg, for example, an increase of over 100 percent was announced, attributed to the presence of repeated advertisements. Some federal states mentioned that they deal with adjusted figures and filter out duplicate advertisements, and the finance ministries stated that there are still ongoing submissions at present.

Extension of Land Tax Deadline in Germany

Germany is facing a crisis over the property tax, with millions of undeclared advertisements and new challenges on the horizon

In late May of last year, the Federal Ministry of Finance received the latest update regarding this issue and announced at that time that the application rate throughout Germany was approximately 90 percent.

The original deadline for submitting property tax declarations was the end of October last year, but it was extended until the end of January – and in the state of Bavaria until the end of April – due to delays in the submission of declarations.

Starting from 2025, there will be a new method for calculating land tax in Germany. This transformation is due to a decision issued by the Federal Constitutional Court in 2018, stating that the current basis for calculating land tax in Germany is unconstitutional.

Whereas the property valuation simulation relied on very old data (1964 in the West and 1935 in the East).

Approximately 36 million properties nationwide must be reevaluated, based on the information that owners are required to submit.

This can be done through the electronic portal known as “Elster,” which many already know for submitting tax returns, and property tax is considered one of the most important sources of revenue for municipalities.

According to the federal government, property tax will not increase generally, and some state finance ministries have indicated that there might be a change in the tax value for some property owners, but the total amount will not rise.

Increasing land tax in Germany

Millions of property tax assessment notices have been sent to owners in the states. However, property owners cannot deduce from this whether land taxes have decreased or increased.

The spokesperson for the Ministry of Finance in Nidersachsen stated that the value of the property tax cannot be calculated currently and that it will be done as soon as possible, most likely in the year 2024.

Municipalities determine the amount of land tax using the tax rate known as the “millage rate,” which determines the tax value.

This rate may vary from one region to another in Germany. In order for municipalities to determine this rate, they need to be aware of the new property tax values, which must be calculated by financial authorities.

“The spokesperson for the German Union of Municipalities and Cities affirmed that the financial situation in many cities and municipalities is extremely strained,” she said:

“Therefore, it cannot be ruled out that some municipalities may be forced to increase the property tax to achieve the necessary financial balance and to carry out the necessary expenses and investments.”

The spokesperson confirmed that the total revenues from the land tax currently amount to approximately 15 billion euros annually. Furthermore, there will be no increase in the final tax amount when implementing the new land tax system starting from the year 2025.

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