Valuation Act

Valuation Act - The Valuation Act (BewG) is the central legal basis in Germany for the valuation of assets, including real estate, for tax purposes, particularly for inheritance and gift tax as well as property tax.

Structure and Significance of the BewG

Since its initial enactment in 1934, the Valuation Act has governed the principles of tax valuation and has been amended numerous times since then. It forms the foundation for the uniform determination of tax values and is divided into a general section containing overarching valuation provisions and a special section containing specific regulations for the valuation of individual types of assets. For real estate owners, the section on the valuation of real property is particularly relevant, as this is where the legislature specifies the methods to be used for valuing land, buildings, and agricultural and forestry operations.

At the core of real estate valuation under the BewG are three standardized methods: the comparative market approach, the income approach, and the cost approach. Which method is applied depends on the type of property. Condominiums and single-family or two-family homes are primarily valued using the sales comparison approach. Rental residential properties and commercial properties are generally valued using the income approach. The cost approach is used when there is neither sufficient comparative data nor reliable income projections available for the property in question.

The so-called ad hoc valuation under the Property Valuation Act (BewG) is conducted on a case-by-case basis, i.e., whenever a need for tax valuation arises, such as in the case of an inheritance, a gift, or in connection with property tax assessment. Unlike a market value determination by an expert, the ad hoc valuation is conducted according to standardized guidelines set by the tax office.

Distinction from the ImmoWertV

A common misconception is to equate the Valuation Act with the Real Estate Valuation Ordinance (ImmoWertV). Although both use similar methods, they serve different purposes. The Valuation Act provides tax values that serve as the basis for calculating taxes. The ImmoWertV, on the other hand, governs the determination of market value as defined by the Building Code and is applied, for example, in appraisals for purchases and sales, in mortgage eligibility assessments, or in legal disputes. The values determined under the BewG therefore regularly deviate from the actual market value, sometimes significantly depending on the type of property and the valuation date.

Property Tax Reform and the BewG

With the 2019 property tax reform, which took effect in 2025, the Valuation Act underwent a fundamental revision. The previous unit values from 1964 (West) and 1935 (East) were replaced by new property tax values. The valuation now takes into account current standard land values, rent levels, and year of construction, which has led to a significant update of the tax assessment bases. Bavaria has made use of the state flexibility clause enshrined in the Basic Law and introduced the area model, in which property and building area are decisive-not the value. Nevertheless, the BewG remains central in Bavaria for inheritance and gift tax cases.

Practical Tip for the Nuremberg Region

In the Nuremberg metropolitan region, property owners have been receiving notices since 2022-in connection with the property tax reform-that are based on valuations under the BewG. However, Bavaria has made use of the state discretion clause and introduced the area-based model, under which the amount of property tax depends not on value but on area. The needs-based assessment under the BewG remains fully relevant for inheritance and gift tax cases, however. We recommend that property owners in Nuremberg, Fürth, Erlangen, and the surrounding counties carefully review the tax assessment notice from the tax office in the event of an inheritance or gift. In many cases, the tax value under the BewG differs significantly from the actual market value, so an appraisal to demonstrate a lower market value may be worthwhile. Especially in sought-after Nuremberg neighborhoods such as Erlenstegen, St. Johannis, or Maxfeld, where market prices have risen sharply in recent years, the values assessed by the tax office may underestimate the market value-in this case, an appraisal is rather counterproductive. In contrast, for inheritances involving older properties in need of renovation, an appraisal is often worthwhile.

Frequently Asked Questions About the Valuation Act

When does the Valuation Act apply to real estate?

The Valuation Act applies whenever a tax-related event requires a determination of the value of real property. The most common cases are inheritances and gifts, in which the tax office determines the real property value as the basis for calculating inheritance or gift tax. The VVA also serves as the basis for property tax assessment-in Bavaria, the area model has been in effect since 2025 as a special Bavarian regulation. Owners should therefore distinguish for which tax purpose a value under the VVA is required, as the procedures and results may vary depending on the occasion.

Can I challenge the value determined under the BewG?

Yes. If the value determined by the tax office under the BewG exceeds the actual market value, owners can provide evidence of the lower fair market value. To do so, they must submit an appraisal by a publicly appointed expert or a recently achieved sales price. An appeal may be filed within one month of receiving the notice. The chances of success depend on how significantly the tax value deviates from the proven market price-experience shows that tax offices do not recognize minor differences.

What distinguishes a valuation under the BewG from a market value appraisal?

A valuation under the BewG is a standardized procedure used by the tax office that is based on flat-rate assumptions and serves exclusively for tax purposes. A market value appraisal under the ImmoWertV, on the other hand, takes into account the individual characteristics of a property and determines the price that can be achieved on the market. For a sale or mortgage, the market value appraisal is always decisive. The tax value under the BewG may be higher or lower than the market value-depending on the property, location, and valuation date.

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