Dáil Éireann Debate, Wednesday - 22 January 2025
338. Deputy Cian O'Callaghan asked the Minister for Finance if commercial rates are still tax deductible if the commercial unit is vacant (details supplied); and if he will make a statement on the matter. [1207/25]
View answerAs a general rule, commercial rates are deductible for tax purposes.
Section 4(4)(a) Local Government Rates and Other Matters Act 2019, as amended by section 263 Historic and Archaeological Heritage and Miscellaneous Provisions Act 2023, sets out who may be considered a “liable person” with responsibility for payment of commercial rates. The liable person may be the occupier of the property on 1 January in the relevant calendar year or, if the property is unoccupied on that date, the person who is for the time being entitled to occupy the property on that date. In circumstances where a commercial unit is vacant, it is most likely the owner of the property will be the liable person as the person entitled to occupy the property.
If the owner of the property was in receipt of rental income from the commercial unit in respect of which the commercial rates are incurred, the rates may be deductible for tax purposes against that income. Section 97 Taxes Consolidation Act 1997 (TCA) section sets out the computation rules and allowable deductions for the computation of profits or gains arising in respect of rental income. Subsection (2) of that section includes a specific deduction for any rate levied by a local authority.
I am advised by Revenue that, in general, expenses incurred before the first letting of a property are not deductible for tax purposes. Similarly, expenses incurred after the final letting of a property are also not tax deductible. However, expenses incurred between lettings may be deducted provided the property was not occupied by the landlord following the termination of the letting and is subsequently let again by the same landlord. In summary, where a commercial property is vacant, the only circumstances in which those rates will be deductible for tax purposes is if the rates are incurred between lettings.
When rates are levied on a person carrying on a trade or profession, the rates are deductible where they represent a cost to the business and are incurred wholly and exclusively for the purposes of the trade or profession. It is possible, depending on the particular facts and circumstances, that rates incurred in relation to a vacant commercial unit could be regarded as being incurred wholly and exclusively for the purposes of the trade or profession. This will be the case, for example, where the commercial unit is vacant for a temporary period pending a ramping up of activities. This deduction is available in accordance with section 81 TCA, which sets out the general rules for deductions for the computation of profits or gains arising in respect of trades and professions.
