Property owners in Germany are required to pay annual property tax as well as the one-time payment of land transfer tax.
The tax rate of the property tax depends on the type of use of the property. A distinction is made between two categories: • Property tax "A": land for agricultural and forestry use • Property tax "B": other developed and constructible land
The property tax rate is calculated by multiplying:
The so-called "unit value" of a property is determined by the competent tax office. It is based on valuations of land from 1964 (1935 for the former East German states) and for this reason, it is therefore generally much lower than the current value of a property.
The property tax rate varies between 0.26% and 1% depending on the type of use of the property and the state in which the property is located.
In comparison with the municipal assessment rate in the case of the commercial tax rate, the municipal assessment rate in the field of property tax is also individually determined by each municipality. In this case, the municipalities set a separate rate for Property tax "A" and for Property tax "B" whereby the tax rate of Property tax "B" is generally somewhat higher.
Example of calculation of the property tax rate for a commercial building in a municipality in a state in West Germany with an average assessment rate of 441% for Property tax "B":
determined Unit Value EUR 1,000,000 (Example) x Property tax index x 0.35% x Local assessment rate "B" x 441% = Property tax rate = EUR 15,435 (~ 1.54% of the determined unit value)
If real estate is acquired in Germany or otherwise transferred, a one-time property transfer tax must be paid (usually by the purchaser of the property). Depending on the state, the property tax rate is 3.5% -6.5% of the agreed purchase price.*
* Payable even in case of foreclosures, exchange etc. only if the purchase price exceeds EUR 2,500
Property transfer tax rates in the respective Federal States in 2015 3.5% Bavaria, Saxony 4.5% Hamburg 5.0% Baden-Württemberg, Bremen, Mecklenburg-Western Pomerania, Lower Saxony, Rhineland-Palatinate, Saxony-Anhalt, Thuringia 6.0% Berlin, Hesse 6.5% Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein The property tax must also be paid if the shares in a partnership with real estate property are transferred to 95% within five years.