Property tax: first tax court denies applications for suspension of execution
In a decision dated August 8, 2023 (Case No. 8 V 300/23), the Nuremberg Tax Court denied applications for suspension of execution against basic assessment notices for the Bavarian property tax – a model with equivalent figures that deviates from the federal model.
In essence, the ruling states: In the summary examination required in the suspension of execution proceedings, the system of determining the real property tax on the basis of a pure area model, as provided for in the Bavarian Real Property Tax Act of December 10, 2021, is not objectionable against the background of the legislator’s considerable scope for assessment. There is no special justified interest in suspension required for the granting of interim relief. This is the first ruling by a tax court published on the new property tax.
The Nuremberg Tax Court did not make a final decision on the merits of the case because the suspension of execution proceedings are summary proceedings. It remains to be seen whether a decision will be made at the next instance (appeal was allowed due to the fundamental importance) or in the main proceedings and whether such decision will be different. In any case, with regard to the constitutional standards, the court referred to the legislator’s broad scope for action, which also included a competence to make standardizations.
Interestingly, however, the court also pointed out that the Bavarian Real Property Tax Act (“BayGrStG”) avoided the constitutional reservations against the consideration of standard land values (citations from the ruling: cf. Kirchhof, DB 2023, 1116, 1118 f.; different view, Richter/Wagner, DB 2023, 1254). The Tax Court did not comment on its stance towards such concerns. It remains to be seen how the citation may affect further proceedings and the appeals, especially those under the federal model.
Should real property tax be appealed?
The topic of property tax and the question of whether to appeal (in cases where no assessment notice has yet been issued) or when a decision can be expected (in cases where an assessment notice has already been issued and appealed) remain on everyone’s lips.
Irrespective of this first decision, “Haus & Grund Deutschland” (German central association of real property owners) and the German Taxpayers’ Association have announced (cf. Immobilienzeitung of September 6, 2023) that they intend to bring an action for failure to act against tax offices on the grounds that the processing of appeals against the new property tax assessment notices took too long.
It is questionable whether other courts will follow the general tenor of the Nuremberg Tax Court. Above all, it is questionable how the courts (which do not have to assess the Bavarian model, but other state models and the federal model) will deal with the constitutional reservations against the consideration of standard land values. Realistically, the appeals based on these arguments cannot be expected to be settled until they have been clarified by the highest court.
As long as the laws’ constitutionality has not been finally clarified, it is probably also unlikely that all other appeals filed on the basis of an incorrect assessment of the property tax value will be processed. Here, too, the tax authorities will probably continue to play for time in order to avoid correcting the correction.
Thus, it remains to be seen what is going to happen after a potentially (re-)established unconstitutionality. Whether a blanket statement to file regular appeals can therefore be upheld seems questionable in light of the reform’s underlying legislative intent (i.e., to base the property tax on appropriate values).