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Residential Zoned Land Tax - A Snapshot

The Residential Zoned Land Tax (RZLT) was introduced in the Finance Act 2021. In November 2022 local authorities published draft maps earmarking lands to be subjected to RZLT. Part of the Government’s “Housing for All – a New Housing Plan for Ireland”, RZLT is intended to encourage early development of lands identified by local authorities as suitably serviced and zoned wholly or partly for residential purposes.

The basics

RZLT will apply to land that is zoned and serviced, and the relevant sites will be taxed at 3% of the market value of the land. It will be administered by Revenue and payable from 2024 for land within the RZLT scope on 1 January 2022.

For lands identified as relevant sites after 1 January 2022, RZLT will be first due in the third year after it comes within scope.

Who, what and where?

As outlined above, RZLT will apply to zoned and serviced sites. For the purposes of RZLT serviced sites include sites already connected or able to be connected to the necessary public infrastructure and facilities including road and footpath access, public lighting, foul sewer drainage, surface water drainage and water supply.

The persons liable to pay RZLT will be the “owners” of a relevant site. Owners is defined broadly in the legislation and includes any person who holds an interest or right to carry out development on or to the land. This could extend to include developers with contractual rights to develop the land.

A limited number of exclusions from the scope of RZLT are available, including:

  • Existing residential properties that are liable for Local Property Tax are not subject to RZLT. However, if the garden or yard attached to the residential property is greater than 0.4047 hectares (one acre), you must register for RZLT.
  • Land that is zoned for a mixture of residential and other uses, where it is reasonable to consider the land is integral to the operation of a business carried out on or beside it;
  • Land used for certain infrastructure or facilities including utilities, transport, and facilities for social, community or recreational purposes; and
  • Sites which are designated as a derelict site and subject to the Derelict Sites Levy.

The default position is all relevant sites are subject to RZLT, however, deferral of payment is possible in limited circumstances, including:

  • While there is an appeal or a judicial review pending regarding the RLZT;
  • Where planning permission has already been granted and cannot proceed due to an appeal to An Bord Pleanála or a judicial review in relation to the grant of planning permission; or
  • Where a commencement notice has been lodged with respect to residential development on a site. Once works commence on a site, RZLT is deferred until (i) the date when the works permanently cease, (ii) there is a change of ownership or (iii) the planning permission expires. If one of those three events take place before the certificate of compliance on completion is lodged with the local authority, the deferred tax or a relevant portion thereof will become due, dependent on status of development.

Owners should be aware that planning appeals by an owner or connected party do not fall within the above exclusions. As a result, a scenario could potentially arise where an owner appeals a grant of planning permission on the basis that it contains conditions that impact the economic viability of the proposed development, and is liable for RZLT while the appeal is pending.

What next

The deadline to make submissions in respect of the inclusion of lands on the initial draft maps published by local authorities was 1 January 2023. If an owner is not satisfied with the decision of the local authority, there is a right of appeal to An Bord Pleanála on or before 1 May 2023. Supplementary maps will be published on 1 May 2023 with an opportunity to make a submission to the local authority by 1 June 2023 and a right of appeal to An Bord Pleanála by 1 September 2023.

Final maps are due to be published on 1 December 2023 and RZLT will be payable in 2024 on any lands included on those final maps.

Conclusion

Whether RZLT will encourage the earlier development of zoned land, remains to be seen. What is clear is that RZLT has the potential to significantly affect developers or owners who may not yet be in a position to develop their site from a feasibility perspective or otherwise.

We would encourage owners to take a pro-active approach to engaging with local authorities in relation to draft maps and with Revenue in relation to any potential deferral of the tax.

For more information regarding RZLT and how it may affect your land please contact a member of our Real Estate team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.



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