Real estate tax 2024 - Current uncertainties with respect to the legal situation

The legal situation regarding real estate tax is still evolving. The most recent ruling by the Federal Fiscal Court (Bundesfinanzhof, BFH) and by the tax courts (Finanzgerichte, FG) have resulted in significant adjustments to the calculation of real estate tax. Contrary to the previous legal requirements of the federal model (Bundesmodell), which did not permit any derogations from the assessed real estate tax value, it will now be possible to recognise a lower market value.
An overview of the recent rulings
As already reported in the 09/2024 issue of the PKF newsletter (see property tax contribution 9/24), the BFH, in its rulings of 27.5.2024 (case references: II B 78/23 and II B 79/23), recently raised doubts about the constitutionality of the valuation rules under the Bundesmodell pursuant to Sections 218 ff. of the Valuation Act (Bewertungsgesetz, BewG). These rules do not provide for any possibility to recognise a market value that is considerably lower. That is why the BFH granted a suspension of enforcement within the framework of temporary legal protection.
In parallel, there are other pending court cases that likewise address the constitutionality of the new valuation rules. For example, the Cologne FG decided, on 19.9.2024 (case reference: 4 K 2189/23), that the valuation rules under the Bundesmodell conform to the guidelines of the Federal Constitutional Court. The FG did not regard these as a violation of the principle of equal treatment under Article 3, paragraph 1 of Germany's Basic Law. Permission was nevertheless granted to lodge an appeal with the BFH. It is thus possible that the BFH will once again give a decision here.
Furthermore, there are still proceedings pending before the Düsseldorf FG that address the doubts about the constitutionality of the new assessment of real estate values in accordance with the Bundesmodell (case references: 11 K 2310/23 Gr and 11 K 2309/23 Gr). The Rhineland-Palatinate FG in its rulings of 23.11.2023 (case references: 4 V 1295/23 and 4 V 1429/23) also expressed concerns in terms of the compatibility with constitutional law within the framework of temporary legal protection.
New prospects for property valuation for real estate tax purposes
The aforementioned BFH ruling of 27.5.2024 in conjunction with the ongoing proceedings before the tax courts have elicited major changes in the perspective on property valuation for real estate tax purposes. The fiscal administration subsequently responded and gave taxpayers the option of recognising a demonstrably lower market value. Despite these adjustments the legal situation is however still uncertain. The Cologne FG, in its above-mentioned ruling of 19.9.2024, declared that the valuation rules were constitutional, however, in other German federal states there are still legal proceedings that call into question the constitutionality of the new real estate tax assessment under the Bundesmodell. This applies to, among others, the proceedings that are still ongoing before the Düsseldorf FG and the provisional rulings by the Rhineland-Palatinate FG (please see above).