How to achieve a refund of real-estate tax in case of vacancies?
Major requirements to do met?
How to apply for the refund of real-estate tax?
Which form and deadline need to be considered for the application?
How much will be refunded?
Introduction
Rental losses due to vacancies reduce the return on any property investment. In the current economic downturn, vacancies are a very real possibility. In addition to the already painful rental losses, the owner is also fully responsible for the operating costs that would otherwise be chargeable. In addition, rising levy rates in cities and municipalities are making property tax an increasingly significant cost factor for both tenants and landlords, particularly in the case of vacancies. If a rented property remains vacant for a long period of time, owners can apply for a waiver of part of the property tax. This article serves as a reminder of the annual application procedure and the 31 March deadline. Special provisions may apply due to state property tax laws.
How to achieve a refund of real-estate tax in case of vacancies?
Refund of real-estate tax according to the Federal Real Estate Tax Act
Real estate lessors whose property is vacant for a longer period can reclaim a part of their paid real-estate tax.
How to apply for the refund of real-estate tax?
The major requirement for the refund is a significant drop in rent income – mostly triggered by vacancies – which must not be provoked by action of the real estate owner. This also includes, for example, the tenant’s inability to pay. The benchmark for such reduction in rent income is the common rent for assets of same type, location, and fitting. Therefore, the refund is not granted in case the lessor terminated the rent contract during the relevant period e.g. with the intention to execute an asset refurbishment or in case of agreement of rent-free periods. Requirements are subject to a close review of the authorities.
The lessor must prove that he has undertaken action to achieve a letting at a market-oriented price. Documentation at an early stage of the attempts to find new tenants is highly recommended.
Which form and deadline need to be considered for the application?
The request for the refund of real-estate tax can be made informally at the municipal town or city authorities. In the federal city states Berlin, Bremen and Hamburg the application should be addressed to the tax authority. The deadline is always the 31st March of the following year. An extension of the deadline is impossible (cut-off date).
How much will be refunded?
In case the reduction in rent-income is more than 50%, a 25% refund of the real-estate tax will be granted. If the asset was 100% vacant and no income was generated in the relevant period, 50% of the real-estate tax will be refunded.
Cases where NO refund will be granted?
No refund will be granted if the reason for the reduction of income has been triggered by influence of the landlord. Thus, in the following events a reduction can be denied:
Practical tip:
Lessors should take into account the following aspects and be able to document them upon request of the authorities:
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Refund of real-estate tax
Mind the filing deadline 31st March
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