Current rates frozen until November next year with local government and European elections due in June
Ireland’s Housing Minister Eoghan Murphy has signalled that an overhaul of the country’s five year old property tax is on the way before the end of next year.
Many tens thousands of people in this country have properties in Ireland, either family homes or holiday residences, liable to the property tax.
The Irish minister is due to meet his Finance counterpart this week to discuss property tax and announce the establishment of a cross-departmental review group.
A decade on from Ireland’s property market and banking collapse the country has seen a huge spike in property values in recent years including a jump of 12 per cent in the last year alone.
The self-assessed annual Local Property Tax (LPT), which came into force in 2013, applies to all residential properties in Ireland and is collected by the Revenue Commissioners. It is based on the self-assessed value of a property and brings in about €463m and has a compliance rate of around 97 per cent.
A €200 annual charge for non-principal private residences (NPPR) was introduced in 2009 – some 360,000 second homes were registered and it brought in €400m – but it was abolished in 2013 and rolled in to the wider local property tax (LPT).
Many homeowners living abroad were unaware of the charges and incurred penalties for late payment of as much as up to €7,230.
The LPT has not been increased for years – it is frozen until November of next year – but the spike in house prices and property values has been outpacing the ability of many owners to pay. By the time of next year’s revaluation average house prices will have risen far above their 2013 level while, for many, incomes will not have increased.
This will be particularly acute in Dublin where the highest number of higher valued properties are to be found. The money raised from Dublin’s property taxes is spent across the country and not just in the capital.
The Local Property Tax (LPT) is based on market value bands.
The first band covers all properties worth up to €100,000. Bands then go up in multiples of €50,000.
If a property is valued at €1 million or lower, the tax is based on the mid-point of the relevant band. For properties valued over €1 million the tax is charged on the balance over €1 million, with no banding applied. The basic LPT rate was set at 0.18 per cent for properties valued under €1 million and 0.25 per cent on the amount of the value over €1 million.
A property said to be worth €245,000 would belong in the €200,000 to €250,000 with a tax liability of 0.18 per cent (the basic rate) or €405 for the year.
For another example say the market value of a residential property is €1,340,000 then the first €1 million is multiplied by 0.18 per cent – €1,800 – and the remaining €340,000 x 0.25% – €850 – leaving an annual liability of €1,800 + €850 or €2,650. The higher rate is 0.25 per cent and rates can be increased or decreased by the appropriate local authorities by a maximum of 15 per cent.
Anyone who owns a residential property in the Republic of Ireland is liable for payment of the tax and that includes local authorities and social housing organisations.
A residential property is any building or structure (or part of a building) which is used as, or is suitable for use as, a dwelling and includes grounds of up to one acre. The LPT does not apply to development sites or farmland. The tax payable is based on the market value of relevant properties.
The LPT is a self-assessment tax so you calculate the tax due based on your own assessment of the market value of the property.
The Revenue Commissioners do not value properties for LPT purposes.
You can opt to make one single payment, due in November of the preceding year, or to phase payments in equal instalments.
Who is liable to pay LPT?
All owners of residential property, including rental properties, are liable to pay the tax. The following groups are also liable for LPT:
• People who have a longterm lease (20 years or more)
• People with a life interest or long-term right of residence (life or more than 20 years) in a residential property
• Local authorities or social housing organisations
• A person acting as a personal representative for a deceased owner (for example, as an ex ecutor/administrator of an estate).
Trustees or beneficiaries are jointly liable where a residential property is held in trust.
Joint owners: If there is more than one owner they need to agree who will make the LPT return and pay the tax. If no one pays the tax Revenue can collect the Revenue Estimate of the LPT liability from any of the owners.
Rental properties: Where the residential property is rented on a normal short-term lease (less than 20 years), the landlord will be liable for LPT.
Long-term leases (more than 20 years), life tenancies and situations where a person occupies a residential property on a rent-free basis over an extended period and without challenge to their right of occupation will be treated as if the occupant owns the property.
In these circumstances, the occupant will be liable for LPT.
By when must it be paid?
You are a liable person for the Local Property Tax if you own a residential property on the liability (or ownership) date. The liability date was 1 May 2013 for the year 2013.
From 2014 on, the liability date is always 1 November in the preceding year. For 2018 the liability date is 1 November 2017.
Unoccupied and uninhabitable properties If a residential property is suitable for use as a dwelling but is unoccupied, it is liable for LPT.
If the property is not suitable for use as a dwelling, it is not liable for LPT and you do not need to make an LPT return. If you think that your property is not suitable for use as a dwelling and it is not being lived in, you must notify Revenue as soon as possible after receiving your LPT return. You must also include relevant supporting documentation, for example, an engineer’s report.
Revenue will consider your claim and make a decision using the documentation you provide. The chargeable value of a residential property is defined as the market value that the property could reasonably be expected to fetch in sale on the open market on the valuation date.
The valuation date is 1 May 2013. This valuation applies until 1 November 2019.
This means that the valuation of your property for LPT purposes on 1 May 2013 will stay the same until 2019 (even if you make improvements to your property).
A property adapted to make it suitable for occupation by a person with a disability (where the adaptation work resulted in an increase in the value of the property) can qualify for a reduction in the market value of the property for LPT purposes. There was a requirement for this work to have been grant-aided by a local authority, but this no longer applies.
You do not have to include documentation when submitting your LPT Return. However, you should keep copies of the information sources when valuing your property in case Revenue queries your valuation. These might include the property section of your local newspaper, information on the sales price of a similar house sold in the area, information downloaded from property websites or details taken from Revenue’s valuation guidance.
The Revenue Commissioners can legally enter a residential property for the purpose of ascertaining its chargeable value.
You must permit a person authorised by the Revenue Commissioners to inspect the property if they consider this necessary.
If you did not submit a Local Property Tax return with your self-assessment of the LPT payable, the Revenue Estimate becomes due and payable.
The Revenue Estimate is automatically displaced when you submit a return with your self-assessment of the amount of LPT due.
Selling your property
You are liable for LPT if you own a property on the liability date. The liability date for 2013 was 1 May 2013.
The liability date for 2014 was 1 November 2013.
Since 2014, the liability date is always 1 November in the preceding year. The liability date for 2018 is 1 November 2017.
The actual charge payable on the property is based on its value on the valuation date (1 May 2013).
The next valuation date is 1 November 2019. For example, if you own a property on 1 November 2017 and subsequently sell it any time before 1 November 2018 you are liable to pay LPT for 2018. This payment should be made before the sale of the property closes.
In most cases a residential property that was exempt on 1 May 2013 continues to be exempt until the next valuation date even where the property is sold, or ownership is transferred by way of gift or an inheritance.
In these cases, the exemption automatically carries over to the new owner of the property.
There is one exception to this: second-hand properties purchased between 1 January 2013 and 31 December 2013 are exempt until the end of 2019 if used as your sole or main residence. But where the property is subsequently sold or otherwise transferred to a new owner after 2013, this exemption no longer applies.