#Real estate #valuation for #tax purposes: standard value, market value etc.

Jurisprudence and administration have developed real estate valuation on the basis of market valuation methods. With the reform of the real estate tax, the standard values will finally be abolished.

A real estate appraisal for income tax purposes may be required in the context of accounting, e.g., to determine the fair market value or partial value or when allocating a total purchase price to the assets land and buildings. A real estate valuation may also be necessary for inheritance and gift tax purposes.

In accordance with settled BFH (German Court of Finance) case law, the residual value method may not be applied when apportioning the purchase price; instead, the apportionment must be based on the ratio of the market values of the assets to each other. For this purpose, the tax authorities have published a generally accessible working aid. With the first version of the working aid, the fair market values could only be determined using the tangible asset method and without applying a tangible asset factor and without taking into account regionally differing production costs. The BFH therefore rejected the working aid as inappropriate, whereupon an extended version was published in which the valuation is primarily carried out using the comparative or capitalized earnings value method, insofar as this is possible due to the data situation. It remains to be seen whether the new working aid will stand up to the requirements of the BFH.

For real estate tax, the unconstitutionality of the old standard values was established. Accordingly, these regulations have now been reformed.

The first main assessment of the new values, which will be included in the first main assessment on January 1, 2025, will take place on January 1, 2022. A new main assessment is to be carried out every seven years.

The federal model is regulated in the BewG (German evaluation law), but the states have the authority to establish their own assessment procedures, which they do in some cases.

In the federal model, developed land is valued either according to the income capitalization approach (residential land) or according to the asset capitalization approach (commercial and mixed-use and other developed land).

The value of an undeveloped plot of land is determined for land tax purposes, as in the case of the market-based methods and for the purposes of inheritance and land transfer tax, by multiplying the standard land value by the area of the plot of land. The expert committees publish the standard land values.

It remains to be seen to what extent the reorganization of the land tax will give rise to further discussions about its constitutionality.