Residential Zoned Land Tax – What You Need to Know

Residential Zoned Land Tax (“RZLT”) was introduced by way of the Finance Act 2021 and will be payable from 2024. The RZLT is an annual tax calculated at 3% of the market value of land which is suitable for residential development and is serviced. The aim of the RZLT is to mobilise lands on which housing can be developed in order to increase the much-needed housing supply by incentivising property developers to develop the land.

The first payments under RZLT will be due on or before 23 May 2024, and annually on 23 May thereafter. Payment will be made to the Revenue Commissioners who are responsible for the management of the tax. Given the time period between introduction of the tax and the first payment due date, any site upon which development has commenced before 1 February 2024 will be exempt from payment of RZLT.

Relevant Lands

In order to fall within the scope for the RZLT, the lands must, on 1 January 2022 (and 1 February after 2024), be;

1. Suitable for residential development;
2. Serviced, including public infrastructure for which there is sufficient capacity for housing to be developed;
3. Included on the Local Authority’s map (see below), which will be updated annually; and
4. Not included in the exclusions (listed below).

Exclusions

There are certain types of land which are excluded from the scope of RZLT as follows;

1. Existing residential property including gardens/yards under 0.4047 hectares (1 acre). Where lands over 0.4047 hectares (1 acre) otherwise fall in-scope, owners must register for RZLT but are NOT liable to pay the tax;
2. Land which is zoned for residential use but is permitted for use as a business to serve people in the locality;
3. Land which is zoned for a mix of uses including residential where the land is integral to the operation of a business on or beside it;
4. Derelict sites to which the Derelict Sites Levy applies;
5. Land which is unsuitable for development for reason of contamination, presence of archaeological artifacts etc.

Local Authority Maps

The Local Authorities will issue maps on an annual basis which will indicate the lands within that Local Authority’s area which will be within scope for RZLT. This map will be published on the website of each of Local Authority every year. Draft maps will first be published in November 2022, supplemental maps in May 2023 and a final map in December 2023. Following the initial mapping process, maps will be updated annually and be available by 31 January each year.

Builders, developers and landowners will have a right of appeal as to their inclusion in the in-scope lands on the maps published.

Our Clients

We have identified particular scenarios in which builders, property developers and landowners including our own clients may find themselves following the introduction of the RZLT;

1. Builders, developers and landowners intending to retain lands subject to RZLT

Valuations
If included as in scope for RZLT, a valuation of the lands must be carried out. RZLT is a self-assessed tax and therefore the owner/developer is responsible for valuing the lands accurately. A professional valuer may be engaged for such valuation but it is not a requirement. The property value must be ascertained for 1 February 2024 and can be used for the following three years. The valuation must then be revised every three years. 3% of the value will be the amount of tax payable. Documentation/records must be kept should Revenue seek to enquire further about the valuation provided.

Returns and Payment of Liability
Where lands fall in-scope of RZLT, the owner/developer of the relevant site is obliged to file returns and make payment. Returns and payment of RZLT will be due on 23 May annually for those landowners/developers who are in-scope on 1 February of that same year.

Penalties will apply to late payments and will be charged at 8% per annum. Surcharges for late filings may also apply at a rate of up to 30% of the liability for the year. In addition, undervaluing the lands can result in surcharges of up to 30% of the value of the lands. If sums remain unpaid, a charge will be placed over the lands by the Revenue Commissioners thus restricting a sale of the lands.

Where there is more than one owner of the site (e.g., the property is held jointly or in a property development partnership), only one return will be required per site which can be completed by the designated person. If there is no designated person, Revenue will appoint one.

2. Builders, developers and landowners of lands subject to RZLT intending to sell or transfer ownership

Landowners or developers who wish to sell their land have certain obligations in respect of RZLT. These obligations also apply where ownership is transferring by way of gift, inheritance or long lease (35 years or more).

The landowner/developer, prior to the sale of the lands, must;

• File a RZLT return;
• Provide certain details of the site, the current landowner and purchaser;
• Pay all outstanding tax and interest due. The seller must also pay or seek to make and agree with Revenue the amount of any penalties outstanding;
• Submit all returns prior to completion of the sale;

Once these matters have been addressed, Revenue will confirm the tax position relative to the site at the date of the sale and will state whether there is a nil balance payable or if unpaid taxes are outstanding.

Outstanding liabilities will become a charge on the property if not properly dealt with, resulting in the inability to complete the sale.

3. Builders, developers and landowners developing their property (Residential and Mixed-Use)

Where residential development commences on a site on which RZLT is payable, the payment of the tax may be deferred. In order to defer RZLT for the duration of the development; i) planning permission must be granted, ii) the site must be used wholly or partially for residential development and iii) a Commencement Notice must be lodged with the local authority. RZLT returns must continue to be filed throughout the period. A deferral will remain in place until a certificate of compliance on completion in respect of the development has been issued.

Where only a portion of a site which is liable for RZLT meets the criteria for deferral, RZLT remains payable on the other portion of the site. The site essentially becomes two relevant sites: one which meets the deferral requirements and one for which RZLT remains chargeable.

If the relevant site is zoned for a mix of uses, RZLT is only liable on the portion of the lands that are suitable for residential development. This will be deemed the ”qualifying part of the site” and must be valued for the purpose of RZLT.

4. Out-of-Scope Landowners/Developers

Lands that are deemed out of scope as per the criteria set out above are subject to RZLT. However, for existing residential properties which are zoned residential on the local authority map and which comprise an area in excess of 0.4047 hectares (1 acre) in size, the landowner/developer must file a return in respect of RZLT and provide certain information in respect of the property.

If a property comes within scope, tax will be payable three years after it comes within scope.