FDC: Residential zoned land tax will come to the fore from this November

‘RESIDENTIAL Zoned Land Tax’ (RZLT) was introduced by the Finance Act 2021. 

The principal purpose of  RZLT is to encourage the timely activation of zoned and serviced residential development land for housing. 

Agricultural land is not exempt from this new tax, but I expect that it will only be applied to a very small quantity of agricultural land in West Cork. 

The primary target of the legislation is ‘brown field sites’ in urban areas where such sites should have pre-existing access to servicing by water, wastewater, roads, footpaths and public lighting.

Each County Council is to prepare a draft map of land zoned for residential or mixed use, including residential land, which has access to the required services. 

These maps are required to be published no later than November 1st. There is clear desire in the drafting of the legislation to have this new tax implemented within a relatively short timeframe. It is unusual to see a specific timeline incorporated into the legislation with no provision for a deviation from this timeline.

The public will have the opportunity to make written submissions regarding the inclusion and exclusion of lands in the draft map. 

The closing date for such submissions will be January 1st 2023. Landowners will also have the opportunity to request a change in the zoning attributed to their lands. The request for change of zoning must be considered by the planners, but they are not bound to de-zone the lands.

During 2023, there will be amendments to the map and opportunities to make written submissions on these amendments. 

The final map must be published on or before December 1st 2023. Landowners with land that is included in the map, and which meets the conditions for inclusion on January 1st 2022 shall be subject to the new tax in 2024 (unless an exemption is available).

Residential property and their gardens are excluded from the tax. No action is required from the landowners where the land is less than an acre. Where gardens exceed one acre, then landowners are required to make a return and avail of an exemption from RZLT.

Where a site becomes a relevant site after 1 January 2022, it will be chargeable for each year commencing in the third year following the year in which it becomes a relevant site – ie if it fulfils the conditions during 2022, then it will be chargeable in 2025.

Residential Zoned Land Tax is a self-assessed tax and is charged at 3% of the value of the relevant lands on the valuation date. There are penalties ranging from 10% to 30% for undervaluing the land and there are penalties for late filing ,which also range from 10% to 30%. We are in the middle of a housing crisis that appears to be worsening over time. Residential Zoned Land Tax is a punitive tax aimed at discouraging the hoarding for development land, but I suspect it will prove to be an unfair tax in many cases, as it has no regard to the economic viability of developing the site, or the practical difficulties in sourcing the labour required to develop a site. 

The publication of the maps at the start of November will bring this issue to the fore. There will be a limited number of farmers faced with the choice of selling land, or seeking to have the farmland de-zoned, as it will be too expensive to meet the new tax obligations.

• Michael Fitzgerald is a tax consultant with FDC in Bandon.