Taxation of Real Estate
Real estate is subject to different taxes: the annual real estate tax on ownership and a one time real estate transfer tax, when purchasing real estate.
Real Estate Tax
A fundamental reform of Germany's real estate tax (Grundsteuer) system took effect in January 2025. The reform makes provision for a new assessment of real estate values. It also simplifies the calculation because it largely relies on average and statistical data to calculate the assessed value of the real estate. An opening clause allows several federal states to follow differing approaches from the federal model described here.
There is essentially a three-step system for calculating the real estate tax: The real estate tax burden is calculated by multiplying the assessed value of the real estate (Grundsteuerwert) with the basic federal tax rate (Steuermesszahl) and with the real estate municipal multiplier of the respective city or municipality (Grundsteuerhebesatz).
Assessed value of real estate
Depending on the type of real estate being assessed, there are different systems of assessing the real estate's value for real estate tax purposes.
The assessed value of undeveloped real estate is generally derived by multiplying its size with the standard ground value (Bodenrichtwert) for the plot. The assessed value of real estate with existing commercial buildings is calculated by adding standardized normal construction costs to the value of the plot. Different adjustments are made, for instance to take into account the age-related reduction in value of buildings.
Differing methods of calculcating the assessed value apply to, for example, real estate with residential buildings or agricultural land and forests.
Basic federal tax rate
In a second step, the assessed value of the real estate is multiplied with the basic federal tax rate (Steuermesszahl) in order to calculate the real estate tax base amount (Grundsteuermessbetrag). According to the federal model, the basic federal tax rate is 0.034% for undeveloped real estate as well as for developed real estate with existing commercial buildings. Other rates apply, for instance, to developed residential real estate or agricultural land and forests.
Municipal multiplier for real estate tax
In a final step to calculate the real estate tax amount, the tax base amount is multiplied with the municipal multiplier which is stipulated individually by the respective city or municipality. There are three different types of municipal multipliers:
- Real estate tax "A": real estate used for agriculture and forestry
- Real estate tax "B": other developed and undeveloped real estate
- Real estate tax type "C" for undeveloped areas that are ready for development.
Opening Clause for Federal States
Germany's real estate tax reform makes provision for an opening clause: The federal states are free to introduce their own deviating provisions in order to calculate real estate tax.
Baden-Wuerttemberg, Bavaria, Hamburg, Hessen, and Niedersachsen have developed different systems on assessing values and calculating the real estate tax. Saarland and Saxony follow the federal model, but have defined deviating basic tax rates.
For further information please refer to this website on the real estate tax reform of the German financial authorities at the federal and federal state level (German language only).
Real Estate Transfer Tax
When domestic real estate is purchased or changes owner, a one-time real estate transfer tax (Grunderwerbsteuer) of the purchase price is levied if the purchase price or consideration exceeds EUR 2,500. Real estate transfer tax is usually paid by the buyer. Real estate transfer tax also applies to a real estate-owning company if 90 percent of the shareholders change within ten years. The tax rate varies from federal state to federal state. Please see the table below for more information.
Real Estate Transfer Tax Rates in the Federal States 2025
3.5%: Bavaria
5.0%: Baden-Wuerttemberg, Bremen, Niedersachsen, Rhineland-Palatinate, Saxony-Anhalt, Thuringia
5.5%: Hamburg, Saxony
6.0%: Berlin, Hessen, Mecklenburg-Vorpommern
6.5%: Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein
