Ireland: Finance Bill 2022 amendments to residential zoned land tax

Residential zoned land tax (RZLT)—introduced in Finance Act 2021—is intended to incentivise the efficient use of land deemed suitable for residential development by levying an annual tax charge on certain sites that are serviced and zoned wholly or partly for residential use.

A limited number of exemptions and reliefs are available for land that is actively used for business purposes, as well as reliefs available for land that is actively being developed for residential or commercial use. In all cases when an exemption or relief is sought, an RZLT return must be filed, and a claim made. When a site falls in scope and a relief or exemption is not available, a charge to RZLT equal to 3% of the market value of the site on the liability date should become payable. The first RZLT charge will be payable in 2024 in respect of land that fell within scope of the tax on 1 January 2022.

Finance Bill 2022 proposes the introduction of various minor amendments to the RZLT regime:

• Zoning submissions: Site owners that request a change of zoning following the inclusion of a site in the first local authority maps must now retain evidence proving their ownership of the site. Given requests for a change in zoning must be submitted by 1 January 2023 for sites included in the first draft map, businesses are advised to begin collecting all necessary evidence of ownership at the earliest opportunity.
• Failure to register for RZLT: A new fixed penalty of €3,000 will apply when a person obligated to register for RZLT fails to do so. Notably, this penalty may therefore apply to owners of residential property when the curtilage exceeds one acre, as such individuals are required to register for RZLT despite no charge arising on their property.
• Late filing surcharge: The late filing surcharge measures have been amended to align with equivalent corporation tax / income tax rules. Deliberately or carelessly filing an incorrect RZLT return will result in the return being deemed not to have been filed on time, with the result that a late filing surcharge may arise.
• Unauthorised development: When determining whether a site may be excluded from the scope of RZLT by reason of its being used for an active business, no account can be taken of any unlawful or unauthorised development on the site. Finance Bill 2022 amendments mean that a deferral may be available while site owners seek retention or substitute consent for unauthorised development.
• Partial completion of development: Amendments to the RZLT deferral that is available to site owners while a site is being developed for residential purposes mean that late payment interest at 8% per annum will be due on any deferred RZLT that becomes payable by reason of expiry of planning permission before completion of development. Previously, no interest was payable on such amounts.
• Lease precluding development: Finance Bill 2022 proposes the introduction of a new relief that may be available when a lease entered into prior to 1 January 2022 precludes development of an in-scope site. Various other conditions must be met, including that the lease must be evidenced in writing and the parties to the lease cannot include the owner and a person connected with them. As presently drafted, the relief would not be available with respect to leases entered into after 1 January 2022.

The scope of RZLT remains very broad with limited reliefs, deferrals or exemptions for site owners that might inadvertently find themselves in scope of the tax. Unfortunately, the proposed changes will provide very limited relief to businesses that are unable to bring forward development of a site due to circumstances outside their control, such as the lack of viable development options or failures in the planning system.

Read a November 2022 report [PDF 1.1 MB] prepared by the KPMG member firm in Ireland