I. On the basis of previous second home tax levies
According to many municipal second home tax statutes, the amount of the second home tax is based on the annual gross rent determined on 01.01.1964. Depending on the statutes, this value is multiplied by various factors in order to take account of the changed conditions. For example, multiplication by the price index of the cost of living for all private households in Germany is common. As this has not been updated since 1999, some municipalities multiply by a now fixed extrapolation factor, for example 4.43. Other municipalities have replaced the price index with the Germany-wide consumer price index.
What all these calculation methods have in common is that, firstly, they are based on an assessment basis from 1964 and, secondly, they determine the annual increase according to uniform nationwide standards, even though rents and property prices have diverged considerably in Germany over the last 55 years. The calculation method is ultimately based on the assumption that the rental value for a lakeside property on Lake Starnberg built in 2018 has developed in the same way over the last 55 years as that of a high-rise apartment with hot water built in 1965 in Kiel Mettenhof.
II. 1965, hot water, WC is not a new luxury building under tax law
The question of whether it is in line with the general principle of equality (Art. 3 para. 1 GG) if an apartment built in 1965 is still considered a high-quality new build under tax law in 2019 because it has a central hot water supply and double glazing was decided "no" by the Federal Constitutional Court last year with regard to property tax.
It was therefore only a matter of time before the second home tax also came under constitutional scrutiny. This has now happened. While the OVG Lüneburg had ruled in 2018 that a second home tax statute based on the annual gross rent was not objectionable, the OVG Schleswig has now contradicted this by declaring the second home tax statutes of two Schleswig-Holstein municipalities to be incompatible with Art. 3 para. 1 GG. In its decision, the OVG Schleswig even went further than the Federal Constitutional Court. Unlike the latter, it did not grant the affected municipalities any leeway in terms of time until a new regulation was passed due to the possibility of retroactivity.
III What does this mean for affected municipalities?
Second home tax statutes that refer to Section 79 BewG and thus to the main assessment date of 1964 must be amended immediately. If the apartments owned are rented apartments, the basis of assessment should be the actual contractually agreed net cold rent, as is already practiced by some municipalities, especially in the new federal states. For condominiums, the market value or the current local rent index is recommended instead.
Dr. Johannes Badenhop
Dr. Moritz von Rochow