Residential Zoned Land Tax – What you need to know!

A new tax set to be introduced called the Residential Zoned Land Tax (“RZLT”) will replace the vacant site levy. The RZLT was introduced under Section 80 of the Finance Act 2021 and is contained in Part 22A of the Taxes Consolidation Act 1997(“TCA 1997”).

What land does it apply to?

Where land is zoned for residential use and is serviced with essential infrastructure sufficient to enable housing to be developed then it will be deemed a “relevant site” and subject to RZLT.

Local authorities have been charged with the task of drawing up the RZLT maps of the land which is being proposed will be subject to the tax and these maps are set to be published by 1 November 2022.

The rate of the levy is 3% of the market value of the land and while lower than the current 7% for the vacant site levy, it is intended to bring more land into the remit of the tax than the vacant site levy.

Land excluded

Land excluded from the remit of the tax include land zoned which is either residential or a mixture of residential and other uses (including authorised developments used to carry on a trade or profession, liable for commercial rates and provide services to residents of adjacent residential areas).

While residential properties are excluded from the scope of the tax there is a distinction however for residential properties where the gardens and yards enjoyed with the residential property exceed 1 acre (0.4047 hectares) and are liable for Local Property Tax (“LPT”).  In these cases, while they are not liable for RZLT, the owner of the property will still be required to register for RZLT if their property has been included on the RZLT final map.

Which party is liable

The legislation states that it is the owner of the relevant site that is the liable person, however, a wide definition is accorded to the “owner”. It defines the owner as including, (i) the registered or deemed registered owner, (ii) a person, other than a mortgagee in possession, who, in his or her own right or as trustee or agent for any other person, is entitled to receive the rack rent of the land, or would if the land was so let and (iii) any other person whose interest in the land entitles them to develop the land. This definition would include developers with contractual rights to develop the land.

Key dates

There are strict timelines set out for every stage of the process and it is important that owners take immediate action to identify whether their lands are being deemed relevant sites for the purpose of the tax and to follow the process should they wish to appeal.

• Draft maps will be published and can be viewed on the local authority websites by 1 November 2022. A newspaper advertisement will be published by the local authority notifying the public of their publication. It is a matter for persons themselves to make their own enquiry and to identify from the maps published whether their lands are being included under the remit of the tax.
• The owners of the lands will have 2 months to make submissions on the maps, no later than 1 January 2023, if they seek their land to be excluded with a decision by the local authority by 1 April 2023.
• Appeals will be dealt with by the local authorities in the first instance and after that by An Bord Pleanála by 1 May 2023.
• A supplemental map will be published on 1 May 2023 which may include additional land which meets the criteria after 1 January 2022 with a similar appeal process. Submissions to be made by 1 June 2023, a decision of the local authority by 1 August 2023 and any appeals to An Bord Pleanála by 1 September 2023.
• The final map reflecting the outcome of the appeals process is set to be published by a local authority by 1 December 2023.
• An owner of land zoned as suitable for residential development and is serviced on 1 January 2022, and on which development has not commenced before 1 February 2024, will be liable to file a return and pay the tax on or before 23 May 2024.
• Where the land comes within the scope of the tax after 1 January 2022, the tax is payable the third year after it comes within the scope of the tax.
• The tax is an annual charge unless a deferral of the tax applies, for instance where development has commenced or the land ceases to be liable to the tax.
• The land is to be valued on 1 February every 3 years following the first valuation.

Will remain a charge against the property

Where an owner fails to pay the tax, underpays or fails to register for RZLT then tax and interest will apply, and it will remain a charge against the property. It is a self-assessment tax but in instances where the land is largely undervalued then a surcharge of 30% may be applied.

A vendor of a property liable for RZLT will not be able to complete the sale of a property deemed a relevant site until all outstanding liability is paid, including accrued interest and any penalties. A Purchaser’s solicitor will look for confirmation of the relevant site as having been registered for RZLT and any liabilities paid up to date, similar to the current revenue LPT system in place.

How we can help

If you have any queries or concerns, or would like to discuss the above in further detail, please feel free to contact Siobhán Whelan in our Real Estate Department (swhelan@bhsm.ie / +353 (0)1 440 8339).

This article is for general information purposes.  Legal advice must be obtained for individual circumstances.  Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.