Income Tax Return
Residential Zoned Land Tax – UPDATE
The publication of Draft Residential Zoned Land Tax Maps by local authorities was announced today by the Minister for Finance, Paschal Donohoe T.D. and the Minister for Housing, Local Government and Heritage, Darragh O’Brien T.D.
Landowners have until 1st January 2023 to make a submission to the relevant local authority as to whether or not their land, on the map, satisfies the criteria to be liable to the tax.
This is part of the implementation of the Residential Zoned Land Tax (RZLT).
What is RZLT?
As you may remember, Residential Zoned Land Tax (RZLT) was introduced by Finance Act 2021 as part of the Government’s ‘Housing for All – a New Housing Plan for Ireland’.
Land within the scope of RZLT will be liable to an annual 3% tax based on its market value from 1st January 2024 onwards.
RZLT will apply to land that on, or after, 1st January 2022, is:
- zoned for residential use and
- serviced
In other words, where the land is zoned as suitable for residential development and serviced after 1st January 2022, tax will be first due in the third year after it comes within scope.
The primary objective of RZLT is activate land for residential development and not to increase the Government’s tax revenue.
It will operate on a self-assessment basis, which places the filing and payments obligations on the landowners. You must retain detailed records to enable the Revenue Commissioners to verify the correct amount of RZLT due and payable.
What should you do?
If you own land liable to RZLT, you must register for the tax.
You will be able to register for RZLT from late 2023.
You will be required to file an annual return to Revenue and pay any liability on or before 23rd May of each year, beginning in 2024.
Please be aware that interest, penalties and surcharges will apply in relation to cases of non-compliance, for example:
- in relation to undervaluation of land
- the late filing of returns.
Exclusions.
There are a number of exclusions from RZLT.
Certain properties are excluded from RZLT such as existing residential properties.
Homeowners will not have to pay the RZLT if they own a dwelling which appears on the local authorities’ RZLT Maps, and this property is subject to Local Property Tax (LPT). In other words, residential properties liable for Local Property Tax (LPT) are not subject to RZLT.
If, however, your garden/yard/land is greater than 0.4047 hectares (one acre) then you must register for RZLT.
No RZLT, however, is payable by owners of these properties.
Summary:
- Registration is available from late 2023.
- Each local authority will publish a Final RZLT Map by 1st December 2023 indicating what lands are subject to the RZLT.
- The RZLT will first fall due on 1st February 2024.
- The pay and file date will be 23rd May 2024.
- If a homeowner owns such a dwelling and the land/gardens/yards attached to it are greater than 0.4047 hectares (1 acre), they will be required to register for the RZLT with the Revenue Commissioners but will not be liable to pay the tax.
For full information, please click:
https://www.revenue.ie/en/property/residential-zoned-land/due-date-excluded-properties.aspx
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.
Residential Zoned Land Tax (RZLT)
On 19th July 2022 the Irish Revenue Commissioners published eBrief No. 148/22.
For full information please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-22a/22a-01-01.pdf
Residential Zoned Land Tax (RZLT) applies to land that, on or after 1st January 2022, is zoned as being suitable for residential development and is serviced, with certain exclusions.
It does not apply to existing residential properties.
Where land is within scope of the tax on 1st January 2022, the tax will be charged from 1st February 2024 onwards.
RZLT is an annual tax, calculated at 3% of the market value of the land within its scope.
Owners of residential properties with yards and gardens greater than 0.4047 hectares will be required to register for RZLT, but will not need to pay it.
Each local authority will be required to prepare and publish a map identifying land within the scope of the tax. This must be updated annually.
An owner of land which is zoned as being suitable for residential development and serviced on 1st January 2022 and where this development has not commenced before 1st February 2024 will be liable to file a return and pay the Residential Zoned Land Tax on or before 23rd May 2024, with certain exclusions.
Where land comes within the scope of the RZLT after 1st January 2022, the tax will be first due in the third year after it comes within scope.
The tax will continue to be payable each year in respect of the land unless a deferral of the tax applies or the land ceases to be liable to the tax.
RZLT will operate on a self-assessment basis.
From 2024 onwards, owners of the land in scope will be required to register for RZLT and then (i) make an annual return to Revenue and (ii) pay any tax liability in May of each year.
Interest, penalties and surcharges will apply in cases of non-compliance, including undervaluation of the land in scope and late filing of returns, etc.
Taxation of Proprietary Directors and Non-Proprietary Directors
There are two main types of director: a proprietary director who owns more than 15% of the share capital of the company and a non-proprietary director who owns less than 15% of the share capital of the company.
In general, a director is deemed to be a ‘chargeable person’ for Income Tax purposes. This means that he/she is obliged to file an Income Tax Return every year even in situations where his/her entire income has already been taxed at source through the PAYE system.
Non-proprietary directors, however, as well as unpaid directors, are excluded from the obligation to file an annual income tax return.
A Proprietary Director must also comply with the self-assessment regime which means he/she has a requirement to make payments on account to meet his/her preliminary tax obligations. In situations where these payments are not made by the due date, the director is exposed to statutory interest at a rate of approximately 8% per annum.
A late surcharge applies in circumstances where the Director’s Income Tax Return is filed after the due date. The surcharge is either (a) 5% where the tax return is delivered within two months of the filing date or (b) 10% where the tax return is not delivered within two months of the filing date. It is important to keep in mind that the surcharge will be calculated on the director’s income tax liability for the year of assessment before taking into account any PAYE deducted from his/her salary at source. It should also be remembered that the Director can only claim a credit for the PAYE deducted if the company has in fact paid over this tax in full to Revenue.
Proprietary directors are not entitled to an Employee Tax Credit. In general, this rule, subject to some exceptions, also applies in relation to a spouse or family member of a proprietary director who is in receipt of a salary from the company. Proprietary Directors and their spouse and family members may, however, be entitled to the Earned Income Credit.
The director’s salary, just like any other employee’s salary, is an allowable deduction for the purposes of calculating Corporation Tax.
According to the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013, a director with a 50% shareholding in the company will be insurable under Class S for PRSI purposes. For proprietary directors with a shareholding of less than 50% of the company the PRSI treatment will be established on a case by case basis.
Where the director has a ‘controlling interest’ in the company, he/she will not be treated as ‘an employed contributor’ for PRSI purposes on any income or salary he/she receives from the company. Therefore, all amounts paid by the company to the director will be insurable under Class ‘S’ meaning that he/she will be treated as a self-employed contributor and liable to PRSI at 4%. Employers’ PRSI will not be applicable to his/her salary.
Where a Director is insured under Class A, PRSI is payable on his/her earnings at 4% and up to 10.75% Employer’s PRSI by the employer/company.
Even if you are not considered to be Irish resident by virtue of the 183 day rule or the “Look Back” rule, if you are in receipt of a salary from an Irish limited company you will be required to pay Income Tax to the Revenue Commissioners. If, however, you are resident in a country with which Ireland has a Double Taxation Agreement and your income is liable to tax in both countries, you should be able to claim relief on the tax you paid in Ireland.