With the preparation of declarations of determination for more than 35 million properties in Germany, advisers are facing a new workload. In addition to building up the knowledge required to implement and assess these cases, the question also arises as to how this „mass issue“ can be dealt with quickly and efficiently within the practice. This is particularly true given that practical experience in this area has so far been scarce.

Brief summary of the background: After the Federal Constitutional Court ruled in 2018 that the previous legal framework for the valuation of land using the standard value was unconstitutional, the Property Tax Reform Act New legislation was introduced in 2019. The federal states have been given the option – and have, to some extent, exercised it – to deviate from the federal model by means of their own state laws. In the areas of agriculture and forestry, all states apply the federal model (largely unchanged)

In practical terms for the firm, this means that both advisers and staff must familiarise themselves with the federal model and, where relevant to the firm’s clients or its regional focus, also familiarise themselves with the state models that differ from it. After all, one quickly hears from all sides that certain models are very straightforward when it comes to completing the declaration of determination. However, once the firm actually begins dealing with the first cases, the complexity often becomes apparent – at the very least in deciding how to categorise the case. If the client base also includes agricultural and forestry land, a third component is added to the knowledge base.

Implementation within the law firm

As both local authorities and the tax authorities are informing property owners about the property tax reform, it is important that law firms also keep their clients informed and offer them support. Letters from local authorities often advise people to seek assistance from tax advisers.

Practical tip 1: Before you inform your clients that you will be assisting them with the property tax reform, give some thought to your billing and pricing model. One of the first questions your clients will ask is about the costs.

The preparation of the declarations of assessment currently allows for three different methods of settlement:

  • Value of the matter in dispute in accordance with the StBVV, Section 24(1), No. 11
  • on a time-spent basis
  • as flat-rate amounts, e.g. per property type

Under the federal model, the calculation of the property tax value allows this to be used as the assessed value for the settlement. In the current draft bill for the amendment dated 3 March 2022, a new paragraph 11a will be introduced, which will enable the calculation of a notional property tax value. This paves the way for settlement declarations for properties in state models that deviate from the federal model to be settled on the basis of a value of the property.

Property tax evaders

Practical tip 2: Obtain a power of attorney from the client. Existing powers of attorney from the client do not, as a rule, authorise the client to view or request the necessary property details from the relevant authorities for the purpose of drawing up the declaration of assessment.

When the declaration of findings is submitted to the tax authorities, details of any existing power of attorney are displayed. There is no requirement to submit or request the power of attorney. In order to draw up the tax assessment returns, information from the land register, for example, is required, amongst other things. If the client does not have an up-to-date copy of this, the law firm can request it. Provided, of course, that the client has granted a power of attorney for this purpose. Furthermore, if a service provider is engaged to obtain various documents from different authorities, that service provider requires a power of attorney from the client authorising the law firm to act on their behalf, and the service provider also requires a power of attorney from the law firm authorising them to act on the law firm’s behalf.

Practical tip 3: Choose a software programme for preparing the declarations of assets and enter the first properties. For example, those belonging to the law firm, staff members, etc. You’ll see that entering the data isn’t the difficult part

In fact, gathering the necessary data is the most time-consuming part of implementing the requirements of the new property tax reform. In many cases, the information from the standard value notice and the land register, supplemented by details of the living and usable areas or the gross floor areas, is sufficient. Whether the property in question is a flat, a detached house or a commercial property, the declaration of assessment can be drawn up quickly. It becomes more labour-intensive, however, when checking the documents for mixed-use properties or partial ownership. That said, the learning curve rises steeply here the more practical cases are processed and recorded.

Property tax reform requires preparation

In summary, it can be said that the property tax reform is feasible. However, what makes implementation difficult is the fact that the tax authorities have not yet fully implemented the entire technical process. Data transmission will take place via the ELSTER interface, which is still subject to changes. The forms for the state-level models are not yet fully available. Only a limited number of standard land values have been published and are accessible as at 1 January 2022. As the submission of the assessment declarations is due to take place between 1 July 2022 and 31 October 2022, thorough preparation is essential and it is advisable to commence data collection at an early stage.