Property Tax Overview in Germany

Germany applies two distinct property-related taxes: Grundsteuer, an annual recurring charge on all land and buildings, and Grunderwerbsteuer, a one-time transfer tax triggered when property changes hands. A third levy, the Vermogensteuer (annual wealth tax), has been suspended since 1997 following a separate Federal Constitutional Court ruling and is not currently in force on property or any other asset class. The 2025 reform of Grundsteuer is the most significant structural change to German property taxation in more than 50 years.

What changed with the Grundsteuer reform effective 1 January 2025?

The Federal Constitutional Court ruled on 10 April 2018 -- cases 1 BvL 11/14, 1 BvL 12/14 and 1 BvL 1/15 -- that the statutory basis for Grundsteuer violated the constitutional equality guarantee in Article 3 of the Basic Law (Grundgesetz). Property had been assessed using Einheitswerte (unit values) frozen at 1964 for the former West Germany and 1935 for the former East Germany. Decades of divergent market-value movements had produced wildly unequal effective tax burdens on identically situated owners. Parliament enacted the Grundsteuer-Reformgesetz in November 2019 and set a hard transition date of 1 January 2025 [1]. Property owners submitted a one-time Grundsteuererklarung (property-tax return) to their local Finanzamt between July and October 2022; those submissions underpinned the new Grundsteuerwert (assessed property-tax value) used for all calculations from 2025 onward.

The reformed calculation follows a three-step formula:

Grundsteuerwert x Steuermesszahl x Hebesatz = Annual Grundsteuer

The Grundsteuerwert is determined by the Finanzamt under standardised statutory rules (Bewertungsgesetz as amended). The Steuermesszahl is a fixed per-mille rate set by federal or state law. The Hebesatz is a percentage multiplier set independently by each municipality. Quarterly instalments fall due in February, May, August and November.

How does the Steuermesszahl differ across Lander and property types?

The Grundsteuer-Reformgesetz introduced a Bundesmodell (federal model) as the default, while simultaneously amending Article 72 of the Basic Law to allow individual Lander to enact their own deviating models (Offnungsklausel). Eleven of Germany's 16 Lander follow the Bundesmodell; five have adopted distinct frameworks [2].

Under the Bundesmodell the Steuermesszahl is:

• 0.31 per mille (per thousand) for residential property (single-family homes, apartments, rental residential)
• 0.34 per mille for non-residential and commercial property
• 0.55 per mille for agricultural and forestry operations

These rates were deliberately calibrated low to achieve approximate revenue neutrality in aggregate across the country, though individual bills may rise or fall depending on how the reformed Grundsteuerwert compares to the old Einheitswert and on how the municipality adjusts its Hebesatz.

Bayern (Bavaria) uses a pure area-based Flachenmodell. The assessed value is calculated using fixed equivalent figures (Aquivalenzzahlen): EUR 0.04 per square metre of land area and EUR 0.50 per square metre of building floor space. Market values play no role. A Steuermesszahl of 100 per cent then applies to these derived figures before multiplication by the municipal Hebesatz [2].

Baden-Wurttemberg uses a Bodenwertmodell (land-value model). The assessed value equals the plot area multiplied by the official standard land value (Bodenrichtwert, published by municipal valuation committees). Buildings and improvements are entirely excluded from the base. The Steuermesszahl is 1.3 per mille for land subject to Grundsteuer B. A 30 per cent reduction applies to residential property, with further reductions possible for publicly subsidised housing [3].

Hamburg, Hessen and Niedersachsen operate hybrid area-and-position models that weight location factors alongside area measurements but do not use full market valuations.

What is the Hebesatz and how high does it run?

The Hebesatz (municipal multiplier) is the primary lever through which each of Germany's approximately 11,000 municipalities calibrates its Grundsteuer revenue. It is expressed as a percentage applied to the Steuermessbetrag (the product of assessed value and Steuermesszahl). There is no statutory cap on the Hebesatz. For 2025, major cities set notably varied rates in response to the new valuation base. Berlin reduced its Hebesatz for Grundsteuer B from 810 per cent to 470 per cent to compensate for higher assessed values. Hamburg raised its Hebesatz from 540 per cent to 975 per cent. Frankfurt raised its rate from 500 per cent to approximately 855 per cent [4]. Small rural municipalities often set rates below 300 per cent. The result is that two structurally identical properties in neighbouring Lander using different models -- or even in neighbouring municipalities -- can carry materially different annual Grundsteuer bills.

What is Grunderwerbsteuer and who pays it?

Grunderwerbsteuer (real-estate transfer tax) is a separate transaction tax levied under the Grunderwerbsteuergesetz (GrEStG) at the point a property changes ownership. It applies to land and buildings located in Germany regardless of where the parties are resident. The buyer is the primary debtor in virtually all residential transactions. The tax base is the contractual purchase price. Rates are set by each Bundesland independently [5]:

• 3.5% -- Bayern (the only state retaining the pre-2006 federal baseline)
• 5.0% -- Baden-Wurttemberg, Bremen, Niedersachsen, Rheinland-Pfalz, Sachsen-Anhalt
• 5.5% -- Hamburg, Sachsen
• 6.0% -- Berlin, Hessen, Mecklenburg-Vorpommern
• 6.5% -- Brandenburg, Nordrhein-Westfalen, Saarland, Schleswig-Holstein
• 5.0% -- Thuringia (reduced from 6.5% effective January 2024)

On a EUR 500,000 purchase in Bayern the buyer pays EUR 17,500; the same property in Brandenburg costs EUR 32,500 in transfer tax alone. Paragraph 3 GrEStG exempts transfers between spouses, civil partners and direct-line relatives (parent to child, grandparent to grandchild). Anti-avoidance rules introduced in the 2021 Steuergesetz tightened share-deal structures: acquiring 90 per cent or more of shares in a property-holding company now triggers Grunderwerbsteuer on the underlying asset value if the acquiring party has not held a comparable interest for at least ten years.

Who pays Grundsteuer, and can landlords pass it to tenants?

The liable party for Grundsteuer is the registered owner of the land or building as of 1 January of the assessment year. Grundsteuer applies to all property categories: owner-occupied residential, rental residential, commercial, and undeveloped land. Non-resident foreign owners are subject to the tax on the same basis as German residents [1].

Landlords renting under residential leases may pass Grundsteuer to tenants as a Betriebskostenposition (operating-cost item). Paragraph 2 Nr. 1 of the Betriebskostenverordnung (Operating Costs Regulation) expressly lists Grundsteuer as a passable cost. The lease agreement must contain a clause expressly allocating Betriebskosten -- a standard phrase such as "der Mieter tragt die Betriebskosten gemas Betriebskostenverordnung" is sufficient under Section 556 BGB [6]. Apportionment across multiple tenants in a single building follows living-area ratios under Section 556a(1) BGB. Landlords must submit the annual Betriebskostenabrechnung (operating-cost statement) within twelve months after the end of the billing period; failure to meet this deadline generally extinguishes the right to claim underpayment from the tenant.

For a fuller treatment of the Grundsteuer statutory framework, annual filing obligations, and the German tax professional designation (Steuerberater), see the Germany country overview. Registered Steuerberater who handle German property transactions can be located through the TaxPros Rated directory. Individuals with cross-border real-estate situations are strongly encouraged to consult a qualified Steuerberater before structuring a transaction or filing a return.