The Local Property Tax (LPT) was introduced under the Finance (Local Property Tax) Act, 2012 and covers all residential property in the State. It replaces the existing Household Charge introduced in 2012 as well as the Non Principal Private Resident (NPPR) Tax introduced in 2009 which covered second homes and investment properties only.
It is, however, important to understand that although this new LPT has replaced these existing taxes, any arrears in respect of either the NPPR or the Household Charge continue to affect and attach to the property in question and in the case of the NPPR, will continue to accumulate until discharged by the property owner.
The rate of LPT is 0.18% on the value of the residential value of the property up to €1m and this rate increase to 0.25% of the value of the property for all residential properties exceeding a value of €1m. The LPT is a self-assessment tax, and so it is up to the property owner to put a value on their property for calculation of tax purposes.
There are nineteen valuation bands and the charge for LPT is applied to the mid-point of each valuation band. The lowest band is for property valued at between €1.00 and €100,000.00 and the mid-point in this band is €50,000.00. Thereafter, each band increases by €50,000.00. Therefore, for property which is valued at between €100,000.00 and €150,000.00, the mid-point of that band is €125,000.00 with the rate payable thereon at 0.18% or €225.00 and so on.
The tax was introduced in the second half of 2013 with the result that for the owners of any second homes or investment properties in 2013, the owner was liable to pay both the NPPR Charge of €200.00 on the property and half the applicable rate of LPT based on the appropriate value band.
Who is responsible for paying?
The responsibility for the payment of LPT lies with the owner of the residential property whether rented or otherwise. However, in addition to the owner being liable for LPT, parties that hold a long-term lease of a residential property defined as twenty years or more, persons with a life interest or long-term right of residence of twenty years and social housing organisations are also liable for the tax on residential properties.
In the case of second homes or rental properties which are currently unoccupied, this is irrelevant from the point of view of LPT and the tax is still liable to be paid on this property. However, if the residential property is not habitable and not suitable for use as a dwelling, it is not liable for LPT and no LPT return needs to be made.
However, in this case, you will have to provide to Revenue some supporting documentation such as an engineer’s report to verify this and Revenue will then consider the position and make a decision based on the documentation provided.
Exemptions from LPT
There are some residential properties which under the terms of the legislation have been made exempt and are accordingly not liable for the LPT charge. One of the main exemptions in this regard was for first time buyers who purchased their residential property between the 1st of January and 31st of December, 2013.
This exemption not only exempts the property from the payment of LPT for 2013 but also for the years 2014, 2015 and 2016. The exemption was to apply only to first time buyers buying residential property as their sole or main residence but due to the wording in the legislation, the exemption was in fact granted to all owner-occupiers who purchased residential property between the 1st of January and the 31st of December, 2013, and they are equally exempt from the payment of the tax up to the end of 2016. Other exempt residential properties are those new and previously unused properties which were purchased from a builder or developer between the 1st of January, 2013 and the 31st of October, 2016 as well as residential properties located in some unfinished housing estates or properties having a significant level of pyrite damage.
In addition to exempt properties from the tax, it is also possible to defer payment of the LPT due to poor financial circumstances and in order to qualify for a full or partial deferral, your gross income must not exceed the categories set out by Revenue. However, it is important to remember in this regard that deferral is not exemption and that interest is charged on the deferred amount and the deferred amount remains a charge on the property.
LPT and the sale of residential property
LPT is a tax on the residential property itself and it is therefore the responsibility of every purchaser to ensure that the tax has been paid and been paid up to the correct property value band before completing the purchase of their residential property. A purchaser is required to form a view on whether the vendor’s valuation is one that could reasonably be arrived at.
However, if a vendor values a property for LPT purposes and subsequently puts it on the market before the following valuation date at a considerably higher value and obtains a considerably higher sale price, a purchaser could take the view that the value band used for the purposes of the calculation of the LPT was too low and in such case, the purchaser is required to submit a revised chargeable value in relation to the next liability date for the tax following the sale.
The chargeable value is defined as the market value that the property could reasonably be expected to obtain in a sale on the open market as on the valuation date. The valuation date set in May 2013 will continue to be the valuation date until the end of 2016 irrespective of whether any improvements, additions or otherwise are made to the property during this period.
The next valuation date taken at the end of 2016 will cover that period up to 2019. For the purposes of the sale of your property, the liability date for 2014 was the 1st of November, 2013 and so therefore, if you own the property as of the 1st of November, 2013, you are liable for the payment of LPT for 2014.
However, from the point of view of a purchaser, all LPT payments will need to be made before the sale of the property closes as a purchaser’s solicitor will not be able to complete the online stamping of the property purchase deed after the sale completes without the property ID number which is furnished in respect of the LPT return.
In summary, this new tax will obviously put a further burden on property owners. It also places a heavy burden on those that either do not have access or are not capable of making the returns online and this applies in particular to older people. Therefore, if you have concerns and are unsure as to whether your property is liable or may qualify for one of the exemptions, it is important to obtain professional advice on same as soon as possible.