Does it make sense to appeal property tax value assessments?

Currently, there are more and more articles in the media advising to file an appeal against the new real estate tax assessment notices, even if they have been issued “correctly” according to the assessment declaration. Below we provide an overview of how these recommendations should be classified and what this means for your individual case.

What is the background for the recommendations?

In 2018, the Federal Constitutional Court ruled that the property tax in its previous form was unconstitutional, resulting in last year’s property tax reform. Various experts and associations are now of the opinion that the new regulation of the property tax is also unconstitutional.

This is justified in particular by the fact that the new valuation of real estate is “comprehensively typified” (e.g. by flat-rate standard land values) and that there is no possibility of proving an actually lower fair market value.

In addition, the final financial impact of the property tax reform on taxpayers is not yet foreseeable, which could constitute a violation of the so-called principle of certainty. This is argued by the fact that the new property tax will apply for the first time from 2025 and the relevant assessment rates of the municipalities are not yet available. Taxpayers would thus currently receive property tax value notices, but would not know until next year how high the property tax would be in the future.

When does it make sense to file an objection?

Regardless of the possible unconstitutionality, an appeal against the property tax value assessments should always be made if the assessments contain substantive errors. This could be, for example, incorrect area information, an incorrect year of construction, an inaccurate standard land value, etc.

If the objection period (one month after notification of the notice) has already expired, a correction is also possible by means of a so-called error-correcting update. This takes place at the beginning of the year in which the error is reported to the tax office. Until the first-time application of the new property tax values from 2025, an error correction in the aforementioned sense is therefore possible in principle even without an appeal.

Is an appeal on the grounds of possible unconstitutionality appropriate?

It should be noted at the outset that an appeal is generally associated with no official costs. Costs are only incurred if the tax advisor is entrusted with the appeal and conducts the correspondence with the tax office. Moreover, an objection is not bound to any particular form. It only has to be filed within one month after notification of the property tax value assessment. Various templates for an objection due to possible unconstitutionality of the new property tax can be found on the Internet.

Procedurally, however, it is likely that such an objection will be rejected by the tax office as unfounded. The general justification of a possible unconstitutionality is not sufficient, since the tax office is bound by the currently applicable law – and thus by the currently applicable property tax. However, in view of the allegedly high number of similar objections and expected lawsuits, the so-called “suspension of the (objection) proceedings” could be requested. This would put the appeal on hold until there is a ruling from the Federal Constitutional Court on the new property tax.

However, whether the Federal Constitutional Court will again classify the property tax as unconstitutional is disputed, at least in the literature. Even in the event of a renewed unconstitutionality, however, a change in the property tax could once again only be ordered for the future and not for the past. In this case, the objection would come to nothing for the years concerned.

Finally, the possible tax advantage of a successful appeal procedure must also be taken into account. For even in the event of a renewed unconstitutionality, the property tax will not be abolished altogether. The added value of a (successful) appeal would thus merely be the difference between the unconstitutional and a constitutionally compliant property tax.

So what is the recommendation?

Here – as so often – it depends on the individual case.

In our opinion, a general appeal would have little chance of success due to possible unconstitutionality. In the event of a refusal, the only option would be to appeal to the tax court, which would, however, entail additional costs. Even in the event of success, the tax advantage is likely to be “manageable”, since the property tax will not be completely eliminated. For the vast majority of cases, such as the classic family home, the condominium, etc., an appeal procedure would therefore probably not make economic sense.

Only in the case of a larger property or a property with a higher value and a correspondingly high property tax, an objection could make sense. The same applies to cases where the typified valuation yields a result that deviates strongly from reality. This would be e.g. the case if the property tax value deviates significantly from the actual market value because value-reducing peculiarities of the property cannot be taken into account in the lump-sum valuation.

We will be happy to answer any questions you may have on the subject of property tax or if you would like us to assist you with your appeal proceedings.