In response to the current housing crisis, the Irish government has introduced a new annual property tax called the vacant homes tax (VHT).
The tax aims to target vacant properties for long periods of the year or permanently, hoping that the increased tax associated with keeping the property empty will encourage property owners to rent or sell their unused property. VHT will apply to properties eligible for local property tax (LPT) that are occupied for less than 30 days a year. The first chargeable period for VHT is from 1 November 2022 to 31 October 2023.
VHT will not apply to derelict properties or properties unsuitable for use as a dwelling. However, there are many situations where a property may unintentionally fall within the charge to VHT.
If you own a holiday home in Ireland, you may fall within the scope of VHT if you occupy the property for less than 30 days a year. Holiday homeowners should keep records of when the property was in use and retain documents such as electricity bills, toll records, restaurant delivery receipts etc., as proof that the property was occupied. These records should be retained for six years.
There are many cases of farms across the country having an unused farmhouse on the property. Although the owner may not consider the house fit for renting due to disrepair or the remote area the property is situated in, it may still be deemed a vacant property by Revenue for VHT purposes. If Local Property Tax (LPT) is payable on the property, with the farmhouse having access to running water and a kitchen, then the property will likely fall within the scope of VHT.
Is my property exempt from Vacant Homes Tax?
Revenue has acknowledged that there are certain times when a property may need to be kept vacant and as such, be exempt from LPT. The main exemptions include the following:
Properties that have been sold during the period.
Properties are actively listed for sale or rent.
Properties are unoccupied due to the illness or death of the owner.
Properties are subject to specific court orders preventing the sale or occupation of the property.
Properties undergoing structural refurbishment.
This list is not exhaustive, and we encourage you to contact us for further clarification if you believe your property may qualify for an exemption.
How much VHT will I pay?
The applicable rate of VHT will be three times the basic LPT payable on the property for the year in which the chargeable period ends. For example, if your current valuation band is between €437,501 - €525,000, the basic rate of LPT is €495. Therefore, the VHT payable will be €1,485 annually (€495 x 3). This is in addition to LPT.
Revenue still needs to confirm how the VHT is to be submitted, but it is likely that it will be filed in a similar manner to LPT. The first due date for filing a VHT return is scheduled for 7 November 2023. The first payment is due on or before 1 January 2024. However, like LPT, there are options for direct debit and annual debit.
The legislation provides for penalties, interest, and, similar to LPT, a late filing surcharge to be applied in cases of non-compliance.
VHT will not be a deductible expense in the calculation of income tax, corporation tax or capital gains tax.
If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars private client tax team below:
Mazars was delighted to participate in the 2023 annual tax advisors survey with the Business Plus, which was published in November. Frank Green, Head of Tax, responds to editor Nick Mulcahy’s questions.