The Hessian Finance Court has expressed serious doubts as to whether the Hessian property tax model is compatible with the Basic Law in respect of certain plots of land situated in areas designated as ‘outlying’ under planning law. The case arose from a dispute over the property tax payable on a leased plot of land on which a golf course is operated.
What is the Hessian area-factor model all about?
Following the property tax reform, the federal states have the option of introducing their own valuation models. Hesse has opted for the so-called ‘area-factor’ model. This model links the tax directly to the plot area and the standard land value, but, in the view of the tax authorities, is in principle independent of value. It is therefore not possible to provide evidence that the actual value of the property is lower.
For plots of land in outlying areas – that is, areas situated outside built-up areas and subject to restrictions under planning law – the Hessian Property Tax Act provides for a special rule: instead of the full standard land value, only 10 per cent of the average standard land value is applied. The rationale behind this is that such areas benefit less from local infrastructure such as roads, sewerage systems or car parks than plots in built-up areas.
What was the Tax Court’s ruling?
The Hessian Finance Court considers it highly doubtful whether the relevant provisions in Section 7(2) of the Hessian Property Tax Act are compatible with the general principle of equality under Article 3(1) of the Basic Law and the guarantee of property rights under Article 14(1) of the Basic Law. The court granted the property owner, as an interim measure, a partial suspension of the enforcement of the property tax assessment as at 1 January 2022. This means that the owner is not required to pay the disputed portion of the property tax for the time being, until the matter has been resolved in principle.
According to the court, the problem lies in the fact that, in the case of very large outdoor areas – such as golf courses, leisure facilities or agricultural holdings with extensive land – a linear calculation based on the size of the plot can result in a disproportionately high tax burden. At the same time, the owners of these areas can hardly increase the intensity of their use, as planning law imposes strict limits in rural areas. More intensive development, which might justify a higher tax burden, is simply not legally possible there.
No hardship provision in place
The Finance Court takes a particularly critical view of the fact that the Hessian model provides for neither a graduated scale for particularly large plots nor a hardship provision for atypical plots of land. Without such a provision, there is a risk of excessive taxation in certain circumstances, which cannot be justified under constitutional law.
However, the court also pointed out that this concerns a relatively small number of cases, which are unlikely to have a significant impact on local authorities’ tax revenue.
What does this mean for those affected?
Anyone in Hesse who owns a large plot of land in a rural area – for example, a campsite, a golf course or a similar facility – should have their property tax assessment notices scrutinised. The Finance Court has expressly allowed the appeal to be referred to the Federal Finance Court on the grounds of its fundamental significance, meaning that a ruling by the highest court is to be expected.
Affected property owners should seek legal or tax advice to assess, on a case-by-case basis, whether it would be advisable to lodge an objection or apply for a stay of enforcement.
Hesse Finance Court, Order of 21 May 2026, Case No. 3 V 1420/24
Source: Haufe: Tax
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