Analysis: An explainer on Ireland's new property taxes: who is liable, what rate will they pay, how are rates assessed and when are payments due?
By Gerard Turley, University of Galway
Now that the local, European and Limerick mayoral elections are over, political and economic commentators have already turned their attention to the general election and Budget 2025. One issue common to both events is taxation and tax policy.
Taxes are levied to raise revenue to pay for public services. Combined with the welfare system, taxes are used to redistribute wealth. Taxes can also influence decision-making and affect behaviour. If well designed, property taxes can serve all three purposes. In the last decade or so, successive Irish governments have introduced three property taxes, namely the local property tax (LPT), the vacant homes tax (VHT) and the residential zoned land tax (RZLT).
Local Property Tax
Introduced in 2013, the purpose of the LPT is to raise revenue to fund local government services. As a recurring tax on real property, it is the residential equivalent of commercial rates, albeit with different design features. Taxpayers are now familiar with this residential property tax, especially since changes were made in 2021 when property prices were revalued for the purposes of the LPT.
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From RTÉ Radio 1's Today with Claire Byrne, is the current local property tax system fit for purpose?
It is the owner rather than the occupier that is liable. The current basic rate is 0.1029%, it is self-assessed, and is due on an annual basis. The tax take is about €500m, or 7% of local government revenue. As the basic rate was reduced and the band intervals were widened in 2021, the next change may be another revaluation of properties as they are expected to be reviewed every four years. Of course, this may be deferred, depending on future residential property prices and other related factors.
In contrast, the purpose of the vacant homes tax and the residential zoned land tax is to influence the behaviour of economic agents, and in particular, increase the supply of residential properties for purchase or rent.
Vacant Homes Tax
The Vacant Homes Tax (VHT) was introduced in the Finance Act 2022 as a measure to increase the supply of housing, by incentivising – in this case, penalising - owners of vacant properties. As stated on Revenue's website, it is an annual tax that applies to residential properties in use as a dwelling for less than 30 days in a 12-month chargeable period. Piggybacking on the LPT regime, the owner is generally the chargeable person, and it is a self-assessed tax.
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From RTÉ Radio 1's Today with Claire Byrne in Sep 2023, thousands of vacant homes will fall under new property tax
Certain exemptions may apply, such as properties actively marketed for sale or rent, properties undergoing structural works or substantial refurbishment or repairs, or properties unoccupied due to illness of the owner. To claim an exemption, the property owner must make a VHT return.
The tax applies on 1 November each year, with the chargeable period defined as the previous 12 months. The first chargeable period for VHT was 1 November 2022 to 31 October 2023, at a rate three times the basic LPT rate. In Budget 2024 the rate was increased to five times the LPT rate. Surcharges apply for a late VHT return.
In November 2023, the Department of Finance published preliminary data on VHT returns. There were over 50,000 properties reported to Revenue, of which approximately 5,000 were declared vacant but with almost 2,000 exemptions claimed, it left only 3,000 properties with a VHT liability. These figures are significantly less than the estimates of properties reported as vacant by the CSO and other sources. Other countries and cities worldwide that have severe housing shortages have introduced vacant property taxes. Internationally, views are mixed and the evidence of their impact is both limited and inconclusive.
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From RTÉ Radio 1's Today with Claire Byrne, reporter Brian O'Connell talks to farmers who say a new residential land tax could force them out of business
Residential Zoned Land Tax (RZLT)
Replacing the Vacant Site Levy, the RZLT was introduced in the Finance Act 2021 as a way of activating zoned, serviced residential lands for housing. It is an annual tax, with owners of zoned, serviced land liable. Where land becomes both zoned and serviced, tax is chargeable in the third year after the year in which it comes within the scope of the tax.
Land that is liable for RZLT is shown on maps prepared by the local authorities. Draft RZLT maps were initially published but objections and challenges - primarily to do with owners of farms and agricultural land - meant that the revised maps were delayed, to January 2025. This meant that the first liability date, initially May 2024 is now February 2025. Maps will be updated annually to reflect changes in the zoning and servicing status of land.
Read more: There's a new tax in town: meet the Residential Zoned Land Tax
The RZLT rate is 3% of the land’s market value on the valuation date. The land will be required to be revalued every three years from the initial valuation date. As with LPT and the VHT, it is a self-assessed tax, administered and collected by Revenue. Residential properties liable for the LPT are exempt from the RZLT.
It remains to be seen how much revenue these property taxes will actually raise in total, and what effect they will have on housing supply. What we can be more certain about is that the issues of taxation and housing will be two of the biggest priorities in Budget 2025 and the general election. What is unclear is the timing of the general election. However, the announcement by new Minister for Finance Jack Chambers that Budget 2025 will be brought forward a week to October 1st increases the likelihood of a general election this side of Christmas.
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Dr Ger Turley is a lecturer at the J.E. Cairnes School of Business and Economics at the University of Galway. He is the co-manager of the Local Authority Finances website.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
