Grundsteuer reform 2025: how German property tax works

Why it was reformed

The Baden-Württemberg ministry’s FAQ explains that a Federal Constitutional Court decision in 2018 found the earlier valuation unconstitutional, that the federal law was rewritten and that the states were allowed to depart from it. Section 266 of the Bewertungsgesetz (BewG, Valuation Act) fixes the first general valuation at 1 January 2022, with the new assessment applying from 1 January 2025. Under it, notices issued before 2025 under the old rules were cancelled by law at the end of 2024 for the future.

Three steps: value, rate, Hebesatz

The federal model has three steps, set out in the Grundsteuergesetz (GrStG, Property Tax Act):

1. The tax office determines a Grundsteuerwert (property tax value) under the Valuation Act.
2. It applies the Steuermesszahl (base rate, in per mille) to get the Steuermessbetrag (base amount), under section 13.
3. The municipality multiplies that amount by its Hebesatz (section 25). The result is the annual tax.

The Hebesatz is the municipality’s decision. It is normally resolved by 30 June of the year and takes effect from the start of that year, and it must be the same for all plots in the municipality (section 25(3) and (4)), although a municipality may set a separate, higher rate for building plots that are ready to build (section 25(5)).

The federal model

For houses and flats, sections 247 to 254 BewG value land by area times the standard land value (Bodenrichtwert) set by the local expert committee. Buildings are valued by the income method: the capitalised net income from a statutory rent per square metre, depending on the state, type of building, size and year of construction, plus the discounted land value. Commercial property uses the cost method.

Section 15 GrStG sets the base rate at 0.31 per mille for single-family houses, two-family houses, rental housing and flats, and 0.34 per mille for undeveloped land and for non-residential property. It is reduced by 25% for subsidised housing and certain housing companies, and by 10% for listed buildings. These reductions are given on application.

The five state models

Saarland and Saxony keep the federal valuation but set their own base rates, according to the footnotes to section 15 GrStG, and other states may adjust rates too. If your property is in one of the five model states, the federal calculation above does not apply to you.

Who pays and when

Section 10 GrStG makes the owner to whom the property is attributed the taxpayer; co-owners are jointly liable. Section 12 adds that the tax is a public charge on the property itself, so unpaid tax can follow the property.

The tax is due in four equal parts on 15 February, 15 May, 15 August and 15 November (section 28(1)). A municipality can set a single payment for very small amounts. On request, you can pay the whole year on 1 July if you apply by 30 September of the previous year. Until a new notice arrives, you pay advance instalments on the old amounts (section 29).

Reporting changes

An owner must report changes that affect the value, type of property or ownership, in one notice by the start of the following year, which the owner has three months to file after the end of the year in which the change happened (section 228(2) BewG). Declarations are filed electronically (section 228(6)).

When the next valuation comes

Section 221 BewG sets a general valuation every seven years, so under the federal model the valuation of 1 January 2022 is followed by another seven years later, and values are reset. Hamburg’s finance authority says its model has only one valuation date (1 January 2022), and Lower Saxony says the same of its model. Hesse describes its model as value-independent.

Which professional to consult

Your assessment notice can be checked by a tax adviser (Steuerberater) or, for the value of the land, a property valuer. The municipality answers questions about the Hebesatz, and the tax office about the base amount. See also owners’ association fees.