Property tax relief for rent loss and vacancy
German property tax (Grundsteuer) attaches to the land, not to the income it produces: it keeps running even when a flat stands empty for a year or the tenant stops paying. The Property Tax Act does provide a valve – relief for a substantial reduction in yield under § 34 GrStG. It is not a favour granted at the municipality's discretion but a statutory entitlement, provided two conditions come together. And it is tied to one fixed date.
Two tiers: 25% and 50%
§ 34 (1) GrStG provides exactly two legal consequences. There is no sliding scale and no discretion as to the amount – either the threshold is crossed or it is not.
| Reduction of the normal gross yield | Property tax waived |
|---|---|
| up to and including 50% | no relief |
| more than 50%, but less than 100% | 25% of the property tax |
| the full 100% | 50% of the property tax |
Both tiers additionally require that the taxpayer is not responsible for the reduction. Without that second condition, even a fully vacant building gets you nowhere.
The benchmark is the “normal gross yield”, not your actual rent
The most common miscalculation happens right at the start. The comparison is not against the rent in your tenancy agreement but against the normal gross yield. For developed land, § 34 (1) GrStG defines this as the customary annual rent, estimated according to the circumstances at the beginning of the relief period and derived from the rent regularly paid for premises of the same or similar type, location and fittings. Operating costs are expressly excluded.
Worked example: an apartment building with vacancies
An apartment building with six equally sized flats. The local customary cold rent at the start of the year produces a normal gross yield of €72,000 per year. The property tax for that year is €1,800.
| Figure | Case A: four flats empty | Case B: building fully empty |
|---|---|---|
| Normal gross yield | €72,000 | €72,000 |
| Cold rent actually received | €30,000 | €0 |
| Reduction in euros | €42,000 | €72,000 |
| Reduction in % | 58.3% | 100% |
| Relief tier | 25% | 50% |
| Relief in euros | €450 | €900 |
Case A clears the threshold by a narrow margin at 58.3% – which is why it pays to document vacancy months per property rather than estimate them at year end. For how such a shortfall works through the overall figures, see the article on calculating the cash flow of a property.
“Not responsible for it” – the real hurdle
The second condition is where applications fail. The statute requires that the taxpayer is not responsible for the reduction in normal gross yield. Which circumstances qualify is not spelled out in § 34 GrStG – the municipality judges that on the evidence you submit.
Owner-occupied commercial premises
If you use the building for your own business, § 34 (2) GrStG treats the reduction in utilisation of the land as the reduction in normal gross yield. A third condition applies here: relief is granted only if collecting the property tax would be inequitable given the economic circumstances of the business. For mixed-use land, § 34 (3) GrStG combines both parts into a single percentage based on their share of the property tax value.
When relief is ruled out
§ 34 (4) GrStG draws an important line: a reduction in yield is not a ground for relief if it can be taken into account for the relief period through an update of the property tax value – or could have been, had the application been filed in time.
Behind this sits a division of responsibilities: lasting changes in value belong in the valuation procedure at the tax office, temporary shortfalls in the relief procedure at the municipality. Under § 222 (1) BewG a value update takes place where the value at the beginning of a calendar year, rounded down to a full €100, deviates from the last assessment date by more than €15,000. If a property is permanently unlettable, examine the update route before filing relief applications year after year.
Procedure and deadline: 31 March decides
Under § 35 (1) GrStG the relief period is the calendar year, and the circumstances of that period are what count. The decision is taken only after it has ended – you cannot apply in advance. § 35 (2) GrStG settles the rest: relief is granted only on application, and that application must be filed by 31 March following the relief period. For the 2026 calendar year that means: apply by 31 March 2027.
The addressee is the body that levies the tax. Under § 1 (1) GrStG the municipality decides whether property tax is levied on land within its territory; where a federal state has no municipalities, § 1 (2) GrStG assigns those rights to the state itself. In the city states, the application therefore does not go to a municipal treasury.
- Record the normal gross yield at the start of the year – local customary cold rent, excluding operating costs.
- Set the cold rent actually received against it and work out the reduction in %.
- Bundle the evidence showing you are not responsible for the shortfall.
- Attach the property tax assessment for the relief period.
- File before 31 March of the following year with the levying body – provably.
What relief means for tax and service charges
Property tax counts as a deductible expense: § 9 (1) sentence 3 no. 2 EStG expressly lists taxes on real property insofar as they relate to buildings used to generate income. If part of the tax is waived, the amount you can claim in the Anlage V (the German rental income schedule) falls accordingly – relief is a reduction in expense, not tax-free extra income.
On the tenant side, property tax is a recoverable public charge under § 2 no. 1 BetrKV. Only what was actually incurred can be passed on, and § 556 (3) BGB binds you to the principle of economic efficiency when you prepare the statement. If relief lowers the property tax, the recoverable amount falls with it – and the vacancy share is borne by the owner anyway. The mechanics of passing the charge on are covered in passing property tax on to tenants; the deadlines for the statement itself are in the article on the service charge statement.
Vacancy and shortfalls, properly documented
RenoDiary keeps rents, vacancy periods, invoices and deadlines together per property – the basis for the relief application and for the Anlage V in one data set.
Try it for freeWhat the courts have decided
Relief for a reduced yield falls historically to the Federal Administrative Court (Bundesverwaltungsgericht), whose decisions cannot be read in full text from here. The Federal Fiscal Court (Bundesfinanzhof, BFH) has ruled on the relief provision twice, though — once on its constitutionality, once on how to calculate for a building with several units.
BFH, judgment of 18 April 2012 – II R 36/10
The rule under which relief only applies once the normal gross yield falls by more than 50% — in substance the rule now found in § 34 (1) GrStG, at the time numbered § 33 GrStG — violates neither the principle of equal treatment nor the prohibition on retroactive legislation. The BFH also made clear that a relief proceeding is not the right forum to challenge the underlying valuation of the property. For landlords that means: the 50% threshold is a fixed, constitutionally sound line — below it there is no discretion, above it no doubt about the rule itself.
BFH, judgment of 27 September 2012 – II R 8/12
Where a building consists of numerous differently equipped, separately lettable units whose market rents differ, whether the owner is responsible for a vacancy must be assessed separately for each empty unit — not for the property as a whole. A joint advertisement asking a minimum rent that exceeded the market level for only a minor part of the space does not automatically forfeit relief for the remaining units. The case was decided under the pre-2008 version of the relief rule, with different percentages; but the duty to assess each unit separately attaches to the "not responsible" requirement, which is unchanged to this day, and so applies in the same way under § 34 (1) GrStG. For an apartment building with differently equipped flats it is therefore worth calculating unit by unit before the whole application is written off.
Frequently asked questions
Is one empty flat in an apartment building enough?
The benchmark is the taxable object as a whole, not the individual flat. In a building with six units a single vacancy does not cross the threshold – more than half of the normal gross yield would have to be lost.
Do I have to apply again every year?
Yes. § 35 (3) GrStG exempts only the cases under § 32 GrStG – cultural assets and green spaces – from annual repetition. That exemption does not extend to relief for a reduction in yield.
Can I apply during the current year?
No. Under § 35 (1) GrStG relief is granted only after the calendar year has ended, and the circumstances of that period are decisive. Before that, the reduction is not yet established.
What about rent lost through tenant insolvency?
The statute does not distinguish by cause; it only asks whether you are responsible for the reduction. What matters is that you pursued the claim seriously – reminders, termination and enforcement titles belong in the application.
And if the tenant reduces the rent because of a defect?
The income is missing then too, but the cause lies in your sphere – and whether you are responsible for the shortfall becomes the central question of the application. Which reductions the law actually supports, and how quickly a delayed repair becomes expensive, is covered in the article on rent reduction from the landlord's side.
Sources
- § 34 GrStG (relief for a substantial reduction in yield on developed land) — Gesetze im Internet (retrieved on 19 August 2026)
- § 35 GrStG (procedure, application deadline) — Gesetze im Internet (retrieved on 19 August 2026)
- § 1 GrStG (municipality's right to levy) — Gesetze im Internet (retrieved on 19 August 2026)
- § 222 BewG (value updates) — Gesetze im Internet (retrieved on 19 August 2026)
- § 9 EStG (deductible expenses, taxes on real property) — Gesetze im Internet (retrieved on 19 August 2026)
- § 2 BetrKV (operating costs, property tax) — Gesetze im Internet (retrieved on 19 August 2026)
- § 556 BGB (agreements on operating costs) — Gesetze im Internet (retrieved on 19 August 2026)
- BFH, judgment of 18 April 2012 – II R 36/10 (constitutionality of the 50% threshold) — Bundesfinanzhof (retrieved on 25 August 2026)
- BFH, judgment of 27 September 2012 – II R 8/12 (assessment per separately lettable unit) — Bundesfinanzhof (retrieved on 25 August 2026)
This article provides general orientation and does not replace individual tax or legal advice within the meaning of § 3 StBerG. Whether relief is granted in an individual case is decided by the levying body on the basis of the evidence you provide.