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This article was written by
Certified Tax Advisor, Lawyer, Director, National Office Tax & Legal
Senior Consultant, National Office Tax & Legal
Real estate properties constitute individual assets that are considerably more difficult to value than, for example, goods or publicly traded securities. Nevertheless, a date-specific property value is often required in various tax contexts, such as inheritance and gift tax, transformation tax law and real estate transfer tax. For the standardized determination of such fair market values, the German legislator relies on various valuation approaches, which in turn depend on general findings of the appraisal committees established under the Building Code. The question of the extent to which notifications of the appraisal committees are subject to judicial review was decided by the German Federal Fiscal Court (Bundesfinanzhof; BFH) in its decision of March 11, 2026 (case no. II R 6/23).
In the case at hand, two taxpayers inherited a condominium. The tax office determined its fair market value using the comparable price approach for built plots according to Section 183 (1) of the German Valuation Act (Bewertungsgesetz; BewG). The core idea of the comparable price approach is to derive the value by using the appraisal committees’ publicly accessible property-price calculator from prices of other properties that were recently subject of a purchase transaction and that are comparable to the property to be valued.
The taxpayers, however, took the view that the condominium should be valued not by the comparable price approach but by the cost approach within the meaning of Section 190 BewG, because valid comparable values were not available. According to that approach, the property value is to be determined from the current cost of the undeveloped land plus the standard construction costs of the building. The latter are also subject to various adjustments, particularly an age-related depreciation factor.
After unsuccessful objection, the lower fiscal court dismissed the taxpayers’ action. The comparable prices communicated by the appraisal committee are generally binding and are only subject to limited judicial review. The courts are only required to examine whether the notifications of an appraisal committee are obviously incorrect. The taxpayers, on the other hand, argued that the comparable values communicated by an appraisal committee should be subject to full judicial review.
As did the court of first instance, the BFH confirmed that the comparable price approach must be applied in the dispute and that the notifications of the appraisal committees are only subject to limited judicial review.
Pursuant to Section 182 BewG, residential property is generally to be valued using the comparable price approach. The cost approach is to be applied subsidiarily only if no comparable prices exist. From a rule-of-law perspective, it is unobjectionable that the primary valuation competence lies with the appraisal committees, especially since they are state authorities established on a statutory basis. In the present case, the values derived from the automated purchase-price collection were moreover adjusted to the valuation object by the appraisal committee using a mathematical-statistical procedure described in detail by the committee, namely the indirect comparable price approach with regression analysis.
The BFH does not share the taxpayers’ argument raised in the revision proceedings that, when applying the comparable price approach, the lowest individual value of the used comparable properties should be applied, since not only particularly high but also particularly low prices may be due to special negotiation skills.
Beyond the property value that results from standardized valuation rules, it remains open to the taxpayer under Section 198 Bew to prove a lower fair market value by means of an expert valuation. However, the costs of such an expert opinion must be borne by the taxpayer, which is why they did not commission such an expert opinion in the present case.
Notes:
Beyond the present case of a condominium, the rules and the principles of limited judicial review confirmed by the BFH are also applicable to properties with owner-occupied single- and two-family houses due to the identical statutory valuation systematics.
Letting properties are generally to be valued using the income approach pursuant to Section 184 et seq. BewG and thus differently. Since also tax income values significantly depends on investigations by the appraisal committees, the limited judicial review should also apply to these.