Germany's New Property Tax Reform Set to Reshape Local Finances in 2025

Municipalities face challenges balancing revenue neutrality and fairness as legal uncertainties and rising tax rates loom.

Germany's property tax reform, effective January 2025, introduces new valuation methods for properties based on 2022 data, aiming for revenue neutrality across municipalities.
Many municipalities are raising tax rates to offset reduced revenues caused by changes in property valuation, with some areas seeing significant increases for residential properties.
The reform allows for differentiated tax rates between residential and non-residential properties, but most municipalities are avoiding this due to legal uncertainties and administrative challenges.
The introduction of the optional 'Grundsteuer C,' aimed at taxing undeveloped land to encourage housing development, has been largely postponed due to legal complexity and lack of standardized guidelines.
Concerns grow over the reform's potential to increase housing costs, particularly for renters, as municipalities struggle to balance tax burdens between residents and businesses.