Taxation of Property

Taxation of Property

Real Property Tax

Every property owner in Germany is liable to pay real property tax (Grundsteuer). The tax rate depends on the type of real property. This is sorted into two distinct categories:

  • Real property tax "A": Real property used for agriculture and forestry.
  • Real property tax "B": Constructible real property or real property with buildings.

Real Property Tax Rate

The real property tax burden is calculated by multiplying:

  • the assessed value of the real property
  • the real property tax rate
  • the municipal multiplier

The assessed real property value is determined by the tax authorities according to the German Assessment Code (Bewertungsgesetz). The German Assessment Code refers to historical property values that are usually significantly lower than current market value.

The tax rate varies between 0.26 percent and 1 percent depending on the Federal State (the real property is located at) and the use of the property.

Similar to the municipal multiplier applied in the trade tax case, the municipal multiplier applied to real property tax is stipulated by each municipality. Municipalities determine a municipal multiplier for both real property tax "A" and real property tax "B", with the rate for "B" usually being higher.

Determining the Real Property Tax Burden

Real property tax burden for a commercial building in a municipality in a Western German Federal State with an average real property tax "B" collection rate of 464 percent:

Assessed ValueEUR 1,000,000 (e.g.)
x Basic real property tax ratex 0.35 percent
x Muncipial multiplier "B"x 464 percent
= Real property tax burden= EUR 16,240 (or approx. 1.62%)

Real Property Transfer Tax

Nhen domestic real estate is sold or changes owner, a one-time real property transfer tax (Grunderwerbssteuer) of the purchase price is levied if the purchase price or consideration exceeds EUR 2,500. Real property transfer tax is usually paid by the buyer. The tax rate varies from federal state to federal state. Please see the table below for more information.

Real Property Transfer Tax Rates in the Respective Federal States 2018

3.5%Bavaria, Saxony
4.5%Hamburg
5.0%Baden-Württemberg, Bremen, Mecklenburg-Vorpommern, Niedersachsen, Rheinland-Pfalz, Saxony-Anhalt
6.0%Berlin, Hessen
6.5%Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein, Thuringia

Real property transfer tax also applies to a real property-owning partnership if 95 percent of the shareholders change within five years.

Actions

Christina Schön Christina Schön | © GTAI/ Illing & Vossbeck Fotografie

Contact Us

Christina Schön

Udo Sellhast Udo Sellhast | © GTAI

Contact Us

Udo Sellhast

Business Information

Interested in basic guidelines for doing business in Germany? This section gets you started.

More