Dáil Éireann Debate, Tuesday - 23 April 2024
209. Deputy Jackie Cahill asked the Minister for Finance given there is an RZT exemption on land with leases in place prior to January 2022, if consideration could be given to a similar exemption for someone who has availed of the favourite niece/nephew relief prior to January 2022 and are not in a position to sell as they are obliged to work the said land for a period of time; and if he will make a statement on the matter. [17736/24]
View answerFinance Act 2021 introduced Part 22A Residential Zoned Land Tax (RZLT) into the Taxes Consolidation Act 1997. The RZLT is designed to prompt residential development by owners of land that is zoned for residential or mixed-use (including residential) purposes and that is serviced.
RZLT is an annual tax, calculated at a rate of 3% of the market value of the land within its scope. The tax will be due and payable from 2025 onwards in respect of land which fell within the scope of the tax on or before 1 January 2022. Where land is zoned or serviced after 1 January 2022, the tax will be first due in the third year after the year in which it comes within scope.
It is important to note that, to come within the scope of RZLT, land must be both zoned for residential use and serviced. Land that is zoned for residential use, but which is not currently serviced, is not within the scope of the tax and will only come within the scope of the tax should the land become serviced at some point in the future. Land will be considered to be serviced for the purposes of the tax where it is reasonable to consider that the land has access to, or may be connected to, public infrastructure and facilities, including roads and footpaths, public lighting, foul sewer drainage, surface water drainage and water supply, necessary for dwellings to be developed on the land and with sufficient service capacity available for such development.
Where land meets the criteria to fall within the scope of the tax as set out above, a number of exemptions and exclusions may apply, such as the exemption noted in the Deputy’s query that applies to land that is within the scope of the tax but is subject to a contract that precludes the landowner from developing it. In order for this exemption to apply, the contract must be a “relevant contract”. A relevant contract is a written lease which does not exceed 35 years, that was entered into prior to 1 January 2022 and that it is reasonable to consider prevents the owner from developing the site. The period of the relevant contract is deemed to be the period during which development is precluded under the terms of the contract.
Where land is subject to a relevant contract, the liable person can claim an exemption from RZLT for the duration of that contract. They must file an annual RZLT return for each year in which the exemption applies.
However, this exemption does not apply where the parties to the relevant contract include the owner of the relevant site and a person connected (within the meaning of section 10 of the Taxes Consolidation Act 1997) with the owner. Additionally, the exemption does not apply where it would be reasonable to consider that the relevant contract was not entered into for bona fide commercial reasons and forms part of an arrangement where one of the main purposes is the avoidance of tax.
Where only part of a site is subject to a relevant contract, the amount of RZLT that is due is calculated based on the area of the site that is not subject to the relevant contract expressed in terms of the overall area of the site.
For example, where a farmer leased land prior to 1 January 2022 and the requisite conditions are met, the farmer may claim an exemption from the tax for the period of the lease.
I am informed by Revenue that the relief from Capital Acquisitions Tax referenced by the Deputy in his query as “favourite niece/nephew relief” does not require the beneficiary, being the niece or nephew of the disponer, to continue to work in the disponer’s business for a specified period following their receipt, by way of gift or inheritance, of the business assets in respect of which this relief has been claimed in order to continue to benefit from the relief. As such, the amendment to RZLT legislation proposed by the Deputy does not appear necessary, given the fact that the sale of land in respect of which a beneficiary has claimed favourite nephew/niece relief for the purposes of Capital Acquisitions Tax will not result in the clawback of such relief.
