Taxation of Property

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.

The real property tax burden is calculated by multiplying:

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

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 real property tax rate depends on the type of real property. The tax rate is e.g. 2.6‰ (0.26 percent) for property used for (semi-) detached houses with a value of up to EUR 60,000 and 3.5 ‰ (0.35 percent) for all remaining types of real property (including commercially used real property).

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

Real property tax burden for a commercial building in a municipality with an average real property tax "B" collection rate of 350 percent:

When domestic real estate is sold or changes owner, a one-time real property transfer tax (Grunderwerbsteuer) of 3.5 percent 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. In Hamburg and Berlin, the rate is 4.5%.

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