Finance Act 2021 introduces a new Part 22A in the TCA to legislate for a residential-zoned land tax. The key objective in introducing this tax is to prompt development by landowners of land zoned for residential development that is serviced.
The legislation applies an annual tax, calculated at 3 per cent of the market value of the land, to land within its scope. Broadly, this is land which is zoned as being suitable for residential development, that is serviced and that is not affected in physical condition by considerations which may impact the ability to provide housing on the land.
Where land which is zoned for a mixture of residential and other uses, only land which is not integral to the operation of a business carried out on or beside it shall be included within the scope of the tax.
Finance Act 2022 makes a number of amendments to Part 22A Residential Zoned Land Tax to support the efficient administration of residential zoned land tax.
Each local authority will publish a map that identifies the land within its functional area that is within the scope of the tax. The maps will be updated annually for changes in zoning or servicing of land.
Landowners will have an opportunity to submit an appeal against inclusion on this map to the local authority in the first instance, and subsequently to An Bord Pleanála where the local authority upholds their original decision. A landowner will also have an opportunity to submit a request to change the zoning status of their land, which will be evaluated by the local authority as a variation to the adopted development plan, taking into account the proper planning and sustainable development of the area.
Where it comes to the attention of the Revenue Commissioners that land which should have been included on the map has been omitted, Revenue will notify the relevant local authority and the map will be amended where appropriate.
Charge to Tax
Where land is within the scope of the tax on 1 January 2022, the tax will be chargeable from 1 January 2024 onwards. Where land comes within the scope of the tax after 1 January 2022, tax will be chargeable in the third year after it comes within scope.
Owners of land within the scope of the tax will be obliged to file annual returns in a format prescribed by the Revenue Commissioners. Certain information in respect of land within scope will be collated from these returns and published by Revenue, following the commencement of the measure.
Owners of land within scope will, from 2024 onwards, have to pay and file with the Revenue Commissioners in May of each year. In cases of non-compliance:
- unpaid tax and interest will accrue as a charge on the land;
- penalties for not filing, or for incorrect filings, may be applied as appropriate; and
- a surcharge of up to 30 per cent will apply if a landowner significantly undervalues their land in a return to the Revenue Commissioners.
Residential zoned land tax is currently not deductible in relation to income tax, corporation tax and capital gains tax. Finance Act 2021 further restricted the deductibility of residential zoned land tax in relation to the universal social charge and the domicile levy.
The tax may be deferred in certain circumstances, including;
- where an appeal against inclusion on the map prepared by the local authority is ongoing;
- where certain legal proceedings delay the commencement of construction, and
- while construction of housing is in progress within the timeframe set out in the planning permission.
Tax deferred during the construction of housing will, on the making of claim, not be payable where a certificate of completion is submitted to a local authority by the end of the timeframe set out in the planning permission.
Provision is also made for the interaction of the deferrals and the administration of estates, and for a deferral of tax, in certain circumstances, that arises during the course of the administration of an estate.
The landowner is obliged to keep books and records relating to the land and the legislation provides for a penalty where adequate books and records are not kept.
2022 Act Deferrals
There is a deferral of the tax on land which is currently subject to an unauthorised use, but where all other conditions for exclusion from the tax, have been met. The deferral applies where a person has applied for retrospective authorisation of the development, pending the decision of the relevant planning authority.
There is an extension of the deferral provided where a landowner brings an appeal or judicial review against a refusal of retrospective authorisation of a development, pending the determination of same.
There is an exemption from the tax in circumstances where landowners are precluded from developing land within the scope of the tax due to contractual obligations entered into prior to 1 January 2022. The exemption applies for the duration of the contractual obligations which existed prior to 1 January 2022.
There is a deferral of residential zoned land tax while residential development is underway; this provision is amended to confirm the date from which any deferred tax is due and payable, once the period of deferral ceases.
There are a number of explicit exclusions from the measure:
- existing habitable dwellings and their curtilage
- land that is used for certain infrastructure or facilities, e.g. utilities, transport, social or community or recreational purposes;
- where a site is designated as a derelict site and liable for the Derelict Sites Levy and
- land which is zoned for residential use but is used to provide services consistent with a residential area, e.g. a corner shop.
Finance Act 2022 requires proof of ownership to be made available where a landowner makes a submission to a local authority to vary the zoning status of land which is within the scope of the tax.
There is a penalty of €3,000 for failure to register for the tax. There is a surcharge for the late filing of returns in respect of the tax in line with that which applies to other taxes under section 1084 of the TCA 1997.
The residential zoned land tax is within the scope of mandatory e-filing, as provided for in Chapter 6 of Part 38 of the Act.