How can landowners prepare for the Residential Zoned Land Tax before the new year

EY Law and Tax experts advise on next steps to prepare for the Residential Zoned Land Tax before the new year, including land criteria, local authority maps and submissions.

In brief:

• Step 1: Assessment of which lands meet the RZLT Criteria
• Step 2: Check the Local Authority Maps
• Step 3: Submissions to the Local Authority

How can landowners prepare for the Residential Zoned Land Tax before the new year

The Residential Zoned Land Tax (RZLT) is a new Irish tax introduced in the Finance Act 2021 and is payable by owners of land or a person who holds any “interest or right in accordance with which that person may carry out development on or to” the land. Importantly, this definition includes parties, for example, a developer who has contractual rights to develop the land.

Effective from 2024, the existing 7% vacant site levy will be replaced by a 3% RZLT, this would mean 3% of the market value which will be collected by the Revenue Commissioners. Like the vacant site levy, RZLT’s objective is to increase housing supply by activation of idle lands in urban areas. However, although a lower charge, it affects a wider range of landbanks than the vacant site levy.

It is likely, in practical terms, that the RZLT will act as an incentive for landowners to utilise vacant lands for the purpose of housing, which should have a positive impact on the housing crisis.

Last month, every local authority, by means of publishing drafted maps on their websites, which took the first steps of identifying lands that they categorise as satisfying the criteria and accordingly subject to RZLT.

How can owners prepare and what should be done before the new year?

1. Assessment of which lands meet the RZLT Criteria

If not already determined, as RZLT is a self-assessed tax, owners need to establish whether their lands meet the criteria and fall within the remit. Generally, to be subject to RZLT, the relevant lands must be:

• Zoned either solely or primarily for residential use; or for a mixture of uses including residential.
• Serviced or have ability to connect to services.
• Not affected physically by considerations which impact the provision of housing.

There are specific exceptions within the Act including, inter alia, lands required for social or governmental infrastructure.

2. Check the Local Authority Maps

Owners should view their relevant local authority website or visit the local authority’s office to view the draft maps which were published last month to determine whether their lands are comprised within.

3. Submissions to the Local Authority

It is essential that, if their lands are comprised within the maps drafted by the local authority, owners familiarise themselves with their rights granted to them to make submissions and appeals during the designation process and, familiarise themselves with the strict pertinent timeframes for such submissions/appeals.

When is action needed?

The most imminent date in respect of the RZLT for owners is 1 January 2023. This is the last date to make submissions to the relevant local authority for removal of lands from maps on the basis it is outside scope, for example, it does not meet the criteria or requesting change in zoning. Action is needed by owners immediately if there are certain observations or discussions that should be made before this deadline. The discussions may require engagement by owners with certain professionals, for example, architects to view the draft map of the local authority and ascertain that the owner’s lands are contained within.

From a costing perspective, the RZLT tax will be a potentially significant cost for owners of residentially zoned and serviced sites which are not being actively developed from 2024.  If land has been provisionally included in a local authority Draft Residential Zoned Tax Map, the landowner should be very cognisant of the 1 January 2023 deadline to make submissions if they believe the land is not within the scope of the tax or wish to apply for a change in zoning.

On 1 December 2023, local authorities will publish final maps reflecting the outcomes of submissions/appeals and any zoning changes which have taken land out of scope or brought land within the scope of RZLT.