The Minister for Finance announced a number of measures in this area including a new €500 rental tax credit, confirmation that the Help to Buy incentive scheme will continue beyond 2022, improvements to the tax relief available for pre-letting expenses of landlords, and a new Vacant Homes Tax. The Residential Development Stamp Duty Refund Scheme and the Living City Initiative are also being extended. Chartered Accountants Ireland, under the auspices of CCAB-I, made a number of tax focused recommendations aimed at tackling the Irish housing crisis in its 2023 Pre-Budget Submission.
New rental tax credit
For taxpayers paying rent on their principal private residence, a new rental tax credit valued at €500 per year is being introduced. This measure, aimed at those who are not in receipt of other State housing supports, will apply for 2023 to 2025 but will also be claimable in early 2023 for rent paid in 2022. Approximately 400,000 individuals are expected to benefit from this credit.
Only one credit may be claimed per person per year, however it is proposed that the value of the credit will be doubled for married couples and civil partners.
New Vacant Homes Tax
The Vacant Homes Tax (VHT) is a new tax that will be introduced in 2023 and charged at a rate equal to three times the property’s existing basic Local Property Tax rate. The tax will apply to buildings which are residential properties for the purposes of LPT. This means that it will not apply to derelict properties or properties unsuitable for use as a dwelling which are not captured under the LPT system. The tax will operate on a self-assessment basis and will be administered by the Revenue Commissioners.
VHT will apply to residential properties occupied for less than 30 days in a 12 month period. The legislation will contain a number of exemptions to ensure owners are not unfairly charged if the property is vacant for a genuine reason. This will include properties recently sold or currently listed for sale or rent, properties vacant due to the occupier’s illness or long-term care, and properties vacant as a result of significant refurbishment work.
This new tax aims to increase the supply of residential properties for either renting or purchasing in order to improve supply to meet demand, with the primary objective of the tax being to change behaviour rather than being a revenue raising measure. It seeks to achieve an appropriate balance between incentivising owners of vacant homes to bring their properties back into use and not penalising home-owners for normal, temporary vacancy.
More detail on this measure is provided in Annex B of Budget 2023: Tax Policy Changes. Further information in respect of this will be available on the publication of the Finance Bill.
Residential Zoned Land Tax
In Budget 2022, the residential zoned land tax (RZLT) was announced as a measure “to encourage the use of land for building homes”. Some further details were provided on this tax in today’s Budget speech by the Minister for Finance.
In order to identify zoned land within the scope of the RZLT, maps are currently being prepared by Local Authorities who will publish their first draft maps on the 1st of November this year. Following the publication of the maps, any landowner will have the opportunity to apply to their Local Authority to have the zoning status of their land amended as part of a variation process.
Finance Bill 2022 will contain a number of amendments aimed at both streamlining the operation of the RZLT and ensuring it is efficiently administered.
Extension of Help to Buy incentive scheme
The Help to Buy incentive scheme is being continued beyond its current end date of 31 December 2022 for a further two years to the end of 2024. The scheme extension will continue at its current rates.
The Minister also stated that as with any tax expenditure, the scheme is being kept under review. Earlier this year an independent review of the scheme was commissioned which was due to be published today. According to the Minister, the report contains a number of recommendations which the Minister stated will be considered by the Government for future budgets.
Relief for pre-letting expenses of landlord
Section 97A TCA 1997 provides that certain expenses incurred on a vacant residential property prior to it being first let after a period of non-occupancy, i.e. “pre-letting expenses”, are authorised as a deduction against rental income from that premises.
This relief for certain pre-letting expenses of landlords on vacant residential premises, due to end on 31 December 2024, is being doubled to €10,000 per premises. Today’s Budget measure aims to continue encouraging landlords in the residential rental sector to return empty properties to the market as quickly as possible and will take effect from 1 January 2023.
The vacancy period in this relief (the period during which the expenditure must have been incurred before the property was let out) is being halved from 12 months to 6 months also from 1 January 2023.
Living City Initiative
The Living City Initiative which was due to end on 31 December 2022 is being extended to 31 December 2027.
In addition, the relief available to owner-occupiers is being accelerated so that it may be claimed over seven years in place of the existing ten years. It is also proposed to allow carry-forward of any excess relief by owner-occupiers where it cannot be absorbed in year, up to a maximum of ten years. No commencement date has been given for these particular changes.
Residential Development Stamp Duty Refund Scheme
The date at which projects wishing to avail of the Residential Development Stamp Duty Refund Scheme in Section 83D SDCA 1999 is being extended from 31 December 2022 to 31 December 2025.
In place since 2017, this is a refund scheme whereby a portion of the stamp duty paid on the acquisition of non-residential land is refunded where that land is subsequently developed for residential purposes (subject to certain conditions).
The net minimum stamp duty payable after a refund is 2 percent compared to the normal current rate for non-residential property of 7.5 percent. The scheme was previously extended by two years in Budget 2021. To the end of 2021, this scheme was used by projects that delivered over 15,000 residential units.
Defective concrete products levy
Due to the cost of the Mica Redress Scheme, a levy on concrete blocks, pouring concrete and certain other concrete products is being introduced from 3 April 2023 at a rate of 10 percent at the point of first supply in the State.
The levy is expected to raise €80 million annually and will be applied to certain concrete products which fall within one of 18 harmonised EU Standards identified as meeting certain criteria. It will also apply to ready to pour (also known as ready-mix) concrete. More detail on this measure is provided in Annex C of Budget 2023: Tax Policy Changes.