Overview of the Local Property Tax
The new local property tax will tax effect from 1 July 2013. The property owner will be liable to the tax (and not tenants where the property is rented). Co-owners will be jointly and severally liable for the tax. A half-year payment will be charged in 2013 and a full year payment will be due from 2014 onwards.
The tax will be charged at a rate of 0.18% on properties valued at less than €1 million and at a rate of 0.25% will apply to any excess value over €1 million. Importantly these rates will be known as the “central rates” but from 2015 onwards, local authorities will be able to vary the rate of these “central rates” by up to +/- 15%. Therefore different rates will apply depending on the local authority that you live under.
The amount of tax paid will be determined on a self-assessment basis. i.e. the property owner must establish the market value and calculate the applicable tax amount to be paid. The property tax will be collected by the Revenue Commissioners.
The Revenue will be setting up a dedicated Lo-Call number to deal with enquiries about the tax from 7th January 2013.
How much tax do I have to pay?
The tax rate will be applied to the market value of your property to arrive at the amount of tax payable. However for the purposes of calculating the tax, property values will be organised into bands.
The first band is €0 - €100,000. Subsequent bands will be organised in values of €50,000 width up to €1 million i.e. the second band is €100,001 to €150,000; the third band is €150,001 to €200,000 etc. The tax liability will be calculated by applying the tax rate to the mid-point of the band. For example, if your property is valued at €130,000 it will fall into the €100,001 to €150,000 band. The mid-point of this band is €125,000. Therefore you will pay 0.18% on €125,000 (and not 0.18% on €130,000). An online calculator is available on the Revenue website to help you work this out at: http://www.revenue.ie/lpt_reckoner/index_en.html
How do I value my property?
In March 2013 the Revenue Commissioners will be sending out an explanatory booklet on the operation of the local property tax including procedures for arriving at the property’s market value. Property owners will also be free to use the services of an independent property valuer if they choose. The new Property Prices Register is also intended to assist people in valuing their property.
You will be required to determine the market value of your property as at 1 May 2013. This valuation will then remain valid for the purpose of your Local Property Tax Return for three years up to and including 2016. This will useful in that you will not need to repeat this exercise each year and also if you improve or renovate the property which may increase the property value before 2016.
However it is not clear from information currently available whether you can choose to revalue your property and resubmit details again before 2016 if you wish to – this would be important in the context of falling property prices.
You will be required to submit a Local Property Tax Return to Revenue stating your valuation either online or using a paper return (however if you own more than one property you cannot avail of the paper return option). Paper returns will be required to submitted by 7th May 2013. If you are filing online you will have until 28th May 2013.
Michael Noonan has advised that a number of methods will be used to identify valuations which are far below market value in an attempt to curb any tax evasion which might arise though the intentional undervaluing of a property. This includes a “heat map” showing the average market value of properties in a particular area. The idea is that if one property owner values their property substantially lower than their neighbours, it should be quickly flagged by the Revenue for further investigation.
The government have said they expect that 85% to 90% of properties will be valued at below €300,000.
Are there any exemptions to the Local Property Tax?
The exemptions to the tax will be broadly in line with those applied to the Household Charge. Additional exemptions will also apply to First Time Buyers and to new or previously unused properties.
Second hand properties purchased by a first time buyer in 2013 will be exempt until the end of 2016.
New and previously unused properties which are purchased from a builder or developer between 1 January 2013 and the end of 2016, will be exempt until the end of 2016.
How and when do I pay the tax?
The tax will be operated and collected by the Revenue Commissioners. You can choose to make one single payment or instead to spread out the payments in equal instalments between 1 July and 31 December 2013. If you are opting for one single payment by a single debit instruction, this will be taken from your bank account on 21 July 2013.
There will be a range of payment options including credit/debit card, direct debit and cash payment through certain providers. You can also opt for voluntary deductions at source meaning payment can be deducted from your salary or certain social welfare payments. If you do not elect for a particular payment method, the Revenue will automatically collect the tax at source.
Interest charges will apply to late payment of tax.
What if I cannot afford to pay?
For owner occupiers with a gross income of up to €15,000 (single) and €25,000 (couples), the tax can be deferred in full until financial circumstances improve or until the property is sold. For owner occupiers with a gross income of up to €25,000 (single) and €35,000 (couples), 50% of the tax can be deferred in full until financial circumstances improve or until the property is sold. However interest at 4% per annum will apply to all deferred amounts.
What about the existing Household Charge? And the NPPR tax on second properties?
The Household Charge will cease with effect from 1 January 2013 as this local property tax is to replace it. In addition the NPPR (non principal private residence) charge on second homes will cease with effect from 1 January 2014. Any unpaid Household Charge or NPPR taxes will remain as a charge on the related property however.
Disclaimer: Please note that the information provide above is based on detail announced in the Budget on 5th December 2012 and is subject to enactment of the Finance Bill 2013.