Road Improvement Fees; Collection

With the Act Amending the Local Taxes Act of June 26, 2018 (GVBl. No. 12 of June 29, 2018, p. 449 et seq.), the Bavarian State Parliament repealed the legal basis for the collection of road improvement contributions in Art. 5, para. 1, sentence 3, and Art. 5b of the Local Tax Act (KAG) with effect as of January 1, 2018, and replaced it with a provision in Article 5(1), sentence 3, of the KAG, pursuant to which, as of that date, contributions for measures to renovate and improve local roads, partially public roads, sections of local thoroughfares under municipal responsibility, and street lighting (road improvement contribution measures) (see LT-Drs. 17/21586).

This provision applies to cases in which the objective obligations to pay contributions had not yet arisen at the time the law took effect. To ensure that contributions can no longer be levied even in cases where, at the time the law took effect, the factual obligations to pay contributions had arisen but the personal obligations to pay contributions had not yet arisen, accompanying provisions are set forth in Art. 19, para. 7, KAG. In addition, transitional provisions in Article 19(8) of the KAG address the handling of advance payments assessed prior to January 1, 2018.

The right and obligation of municipalities to levy development contributions pursuant to Article 5a of the KAG remain unaffected by this Act.

Road improvement contributions, much like development contributions, could reach a significant amount.

If the collection of these fees from the party liable to pay—even after the abolition of road construction fees as of December 31, 2017—results in undue hardship, it is within the discretion of the municipalities to alleviate this hardship through equitable measures, such as installment payments, spreading payments over time, deferral, or waiver—in a socially responsible manner. The party liable for the contribution may submit a request to their municipality for this purpose.

The Free State of Bavaria established a hardship fund in Article 19a of the KAG with a one-time allocation of €50 million to provide proportional compensation for certain hardships resulting from road improvement contributions levied during the period from January 1, 2014, to December 31, December 2017. An independent commission, not bound by technical directives, decided on the granting of benefits. Applications for hardship relief could only be submitted until December 31, 2019.