Residential Zoned Land Tax (RZLT)

As part of its strategy to meet increased demand for housing, the Government had introduced and then deferred the Residential Zoned Land Tax [RZLT].   Budget 2025 has put an end to the short reprieve from the tax which will now come into effect on 1^st February 2025.  From that date landowners (including those who have an interest in the relevant lands or who may have an entitlement to develop the lands) will be liable to file a tax return and pay all tax due on relevant property on a self-assessment basis.

RZLT will be charged at 3% of the market value on land which is partly or entirely zoned as residential land and which is or can be connected to public services such as water supply, drainage, waste treatment and roads.  All local authorities have published maps identifying lands which are considered residential lands for the purposes of the tax and these maps are due to be updated annually.  Owners of serviced lands which were zoned residential on 1^st January 2022 and which are not exempt from the tax are required to file a return and pay the tax due by 23^rd May 2024.  Property which qualifies as Residential Zoned Land after 1^st January 2022 will become liable in the third year of qualifying.

Some property will be exempt from the tax and these exemptions include property subject to Local Property Tax (up to I acre), land adjacent to and considered integral to a business and which is zoned mixed residential/business and properties which are derelict and subject to the Derelict Site Levy. Certain other limited categories of land will be exempt.

Owners of properties which are subject to Local Property Tax and have a garden or curtilage exceeding one acre will not be obliged to pay Residential Zoned Land Tax but will be obliged to complete and file a tax return which will include details of the property.

The tax proved a controversial talking point before the introduction of the budget and prompted some speculation of division at the Cabinet Table amid concerns about the impact the tax would have on farmers.  Budget 2025 included a new measure to allow for the exclusion of certain lands from the tax in a bid to stem these concerns.    This new measure provides that a landowner can apply to his/her/their Local Authority to rezone land in order to remove it from the Residential Lands Tax net.

Careful consideration of this tax should be given by all landowners and their solicitors and tax advisors.  There are different valuation dates and deadlines for filing of returns and payment of tax due as well as deadlines for making submissions for rezoning and appealing the inclusion of lands in the Local Authority maps.  As with all taxes, interest, penalties and surcharges can be levied in the event of non-payment or under-payment of tax and failure to file the relevant return.  All Landowners should check the relevant maps to confirm that their properties are correctly designated for the purposes of the tax and should be aware of their obligation to file necessary returns and pay any tax due.

For conveyancers who were looking forward to seeing the back of the Non-Principal Private Residence Charge on 1^st March 2025, this tax has come along in time to replace it.  RZLT and any interest and penalties due thereon will act as a charge on property.  A vendor will be required to file all returns and pay all tax due prior to the sale of Residential Zoned Lands and the Revenue Commissioners will issue a Certificate of clearance.  Further guidance on what precisely will constitute adequate protection for a purchaser of Residential Zoned Lands from the Revenue Commissioners and/or the Law Society is awaited.

While the changes to RZLT were flagged before the Budget and have been the subject of discussion in  the media since, among the quieter but nevertheless significant changes to property taxation in the Budget were two tax increases:-

• Stamp Duty on residential property where the sale price exceeds €1,500,000.00 increased from 2% to 6%. Stamp duty of 1% on sale proceeds up to €1,000,000.00 remains at 1% and on sale proceeds between €1,000,000.00 and €1,500,000.00 remains at 2%.

• The Vacant Homes Tax increased from 5 times the basic Local Property Tax Rate to 7 times the Local Property Tax rate for the period 1^st November 2024 to 31^s October 2025.

For further information on the tax considerations involved in the sale and purchase of property or any aspect of conveyancing contact Niamh Ryan at nryan@reddycharlton.ie