With effect from 1 July 2010, the Real Estate Valuation Ordinance (ImmoWertV) replaced the older Valuation Ordinance (WertV). This raises an important question for appraisal practice: which ordinance applies if the appraisal report is prepared after 2010 but the valuation date lies before that – for example, because an inheritance case already occurred in 2009? The Federal Fiscal Court (BFH) ruling of 16 September 2020 (Case No. II R 1/18) has fundamentally resolved this question.

The case

An heiress had inherited a one-third share of a mixed-use property – 87% residential use, 13% commercial share. The inheritance occurred on 1 June 2009, still under the old WertV. The tax office valued the property using the standardized income approach at EUR 4,867,500. The heiress considered this approach significantly overstated and submitted an expert appraisal report that determined a value of EUR 1,900,000. The tax office rejected the appraisal report – citing, among other things, that it had applied the wrong valuation provisions.

The decision

The BFH referred the case back to the fiscal court but clarified several practice-relevant principles:

1. Valuation date principle in valuation law: For proof of a lower fair market value pursuant to Section 198 of the German Valuation Act (BewG) the law in force on the valuation date applies – not the law in force at the time the appraisal report is prepared. An appraisal report prepared in 2011 concerning an inheritance case from 1 June 2009 must therefore apply the WertV and not the ImmoWertV.

2. Properties spanning multiple standard land value zones: If a property extends across multiple standard land value zones, the land value must not simply be applied using a single zone value on a blanket basis. Instead, an individual, area-proportionate determination of the land value must be carried out for each zone.

3. Property interest rate for mixed-use properties: For mixed-use properties with a commercial share of less than 50%, for which no official property interest rate from the expert committee (Gutachterausschuss) is available, the statutory interest rate of 5.5% must be applied.

What this means for older inheritance cases and ongoing proceedings

This ruling is particularly relevant for cases in which the date of inheritance or gift transfer falls before 1 July 2010, but an appraisal report was commissioned only afterwards or is yet to be commissioned. Valuers who base their valuation on the ImmoWertV without checking the valuation date risk having their appraisal report deemed unusable by the tax office.

The issue of standard land values is also practically relevant: particularly in urban locations or peripheral areas with mixed-use structures, properties frequently extend across multiple zones. A blanket application of the same standard land value to the entire area is not sufficient in these cases.

Conclusion

BFH II R 1/18 serves as a reminder of the need for methodological diligence: expert appraisal reports in a tax context must not only be substantively correct but must also apply the law in force on the valuation date relevant valuation date. Anyone who overlooks this point risks the tax office rejecting the appraisal report – even if the determined value is factually correct. For all cases with a valuation date prior to 1 July 2010, the rule is: check the WertV, not the ImmoWertV.