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.
Contact Details:
01-6877400
info@fenero.ie
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