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.
The Real Property Tax Reform
The reform of real property tax maintains the three-step system for calculating the real property tax rate but makes provision for a new assessment of real property values as of January 1, 2022. The reform also simplifies the calculation from 2025 onward, because it largely relies on average and statistical data to calculate the assessed value of the real property.
The German federal states are free to introduce their own deviating provisions in order to impose and calculate real property tax.