In order to implement the property tax reform that will come into force on January 1, 2025, the municipal bodies will decide on the adoption of an assessment tax statute for the first time. This is necessary because the previous property tax assessments will be repealed by law on December 31, 2024. The main committee will deal with this issue first.
Why was there a property tax reform?
As is well known, the Federal Constitutional Court declared the previous procedure for determining the property tax assessment amount to be unconstitutional back in 2018 and called for property to be taxed on the basis of current values. As a result, the federal government passed corresponding reform legislation. As a result, all owners of undeveloped and developed land, residential and commercial buildings as well as agricultural and forestry businesses had to submit declarations of assessment to the tax office (declaration to determine the property tax value).
Based on this information, the tax offices have determined the new property tax assessment amounts that will apply from January 1, 2025. These form the basis for the property taxes to be set by the local authorities. The previously applicable property tax assessment and property tax notices will be repealed by law on December 31, 2024.
How is property tax determined?
To determine the property tax, the measured amount is multiplied by the assessment rate set by the municipality. The assessment rate for property tax A applies to agriculture and forestry, while the assessment rate for property tax B applies to residential and commercial properties. The municipal council decides on the level of the assessment rates, which is usually set out in the budget bylaws.
Normally, the assessment rates and thus the property tax assessments issued on their basis continue to apply until a change is made. However, the previous property tax assessments will now be repealed by law on December 31, 2024. However, as many local authorities will not yet have a valid budget bylaw for 2025, many will make use of the option to issue a special assessment rate bylaw before then. This regulates the level of the assessment rates until the budget bylaws come into force.
What does revenue neutrality mean?
The Federal Ministry of Finance is appealing to local authorities to ensure that the new property tax rate from January 1, 2025 is revenue-neutral. This means that a municipality will collect roughly the same amount of property tax after the reform comes into force as before. This is the total property tax revenue (separated into A and B). However, revenue neutrality does not mean that the individual property tax amount remains the same for every taxpayer. Due to the revaluation of the property, there may well be significant changes in some cases.
What are the specific effects of the reform in Idar-Oberstein?
A collection rate statute is also to be issued for the city of Idar-Oberstein. This statute, which is to be adopted by the city council, will be discussed for the first time at the meeting of the main committee on October 2, 2024. The consultation draft can be viewed in the council and citizen information system at https://idar-oberstein.gremien.info/meeting.php?id=2024-HAA-39
As planned, the level of the new assessment rates to be set therein is based on revenue neutrality. In the case of property tax B, the total assessed amounts for the entire city area will fall sharply from the previous EUR 1,064,228.44 to an expected EUR 711,038.17. In order to achieve approximately the same property tax revenue as before, the assessment rate would have to be adjusted from 535 percent to 800 percent. In contrast, the sum of the assessed amounts for property tax A will increase from the previous EUR 3,438.85 to an expected EUR 5,321.19, meaning that the assessment rate could be reduced from the previous 345% to 222%.